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POST OFFICE: FUTURE, PAST AND PRESENT
Nick Read, Chief Executive Officer, Thursday 8 April 2021
INTRODUCTION
1. As we start our new financial year - and as we emerge from lockdown - let’s take stock.
2. Like every business in the country, Post Office is facing a new reality.
3. Our place at the heart of the high street, providing essential services in communities across the UK,
is far from assured.
4. The pandemic has emphasised once again just how many people rely on us.
5. Being open every day when just about everything else is closed, is as vital as it is appreciated.
6. But make no mistake — this new reality is both harsh in nature and distinctly unsentimental.
7. Retail is facing a degree of upheaval unimaginable even a year ago.
8. Pre-existing trends, like the rise of e-commerce, have been accelerated almost beyond
comprehension.
9. The demise of many of the ‘big’ names on the high street makes brutally clear that a long history
offers no guarantee of a successful future.
10. Like everyone else, we must adapt or we potentially face a similar fate.
11. However, unlike every business in the country, Post Office is facing another harsh reality.
12. That is the need to confront, and face up, to its recent past.
13. We need to face facts. We failed a large number of postmasters in our recent history.
14. In just over two weeks’ time, the Court of Appeal will determine whether a number of criminal
convictions resulting from historical Post Office investigations and prosecutions are safe.
15. Only the Court can decide such things.
16. But we can, and we have, expressed a clear view through the stance we have taken in the
proceedings.
17. In deciding not to oppose the overwhelming majority of these cases, the perspective of those of us
leading the Post Office today is clear.
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An independent Inquiry, led by Sir Wyn Williams, is scheduled to report later this year on our
progress in making the sweeping changes needed to prevent a recurrence.
Confronting either of these challenges would be a tall order. Confronting both simultaneously is
positively daunting.
Today, I say that, daunting though it undoubtedly is, it can be done.
Indeed, I argue that it must be done in the interests of those customers who continue to rely on us
for essential services.
It must be done for those who will continue to need us as a vital physical presence in an increasingly
digital and impersonal world.
And it must be done in the interests of postmasters without whom there is no Post Office.
They must have the confidence that history will not repeat itself.
They must experience that Post Office has changed and changed for good, as we work together to
build a successful and equitable business.
Our first test is to resolve the past once and for all.
We must ensure that all Postmasters affected by this scandal are compensated, and compensated
quickly.
Whether Post Office’s treatment of its postmasters in relation to Horizon amounts to a large-scale
miscarriage of justice is for the Court to determine, but I know what I think.
Our organisation’s historic handling of this matter fell short.
lam in no doubt as to the human cost of this.
I have heard it in the testimony of those during civil and criminal proceedings, and in the
submissions to Sir Wyn’s inquiry.
We have to accept that it is the Post Office that caused what for some has been very deep pain.
Absent the possibility of turning the clock back, compensation appropriate to that pain must follow.
And we need to face this reality.
Post Office cannot deliver the future our Postmasters and customers deserve until we have
come to a comprehensive and swift resolution that recognises the scale of our shortcomings.
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THE FUTURE — POST OFFICE IN 2025
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I am not prepared to forgo that opportunity because I know that Post Office has a bright future if we
focus on the right things.
In four years’ time, people’s experience of the Post Office will be markedly different.
I want it to be a successful, sustainable, and sought-after franchise.
There are seven strands to our future success.
First, we will prioritise strong, trusting and rewarding relationships with our postmasters
A franchise firmly rooted in true partnership, with mutually reinforcing benefits for Post Office
Limited and Postmasters.
A franchise in which Post Office and postmasters have a clear understanding of how they work
together to make the joint enterprise profitable in the service of the community.
A partnership which, in particular, recognises the Post Office’s principal responsibility as a franchisor
to serve and support postmasters to give their best each and every day.
Second, we will grow our network, making sure we have the right branches in the right locations
nationwide.
We are the only retailer with a presence in each nation and in every community across the United
Kingdom.
We are fundamentally a ‘bricks and mortar’ retailer and we will remain local to everyone.
The imperative to do so has only been strengthened over these last twelve months.
A year in which the service provided by our postmasters has never been more essential, nor better
appreciated.
We know that sense of connection, continuity and trust has been important to people, to
communities, as the country has sought to navigate coronavirus.
Thanks to Postmasters working hard day-in, day-out, we have been conspicuously faithful to our
Purpose over this difficult period: “We are here, in person, for those who rely on us.”
But to remain here we, too, will need to adapt to the times.
Our branch network must evolve for the way in which people live their lives today.
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Where appropriate, we need to offer prospective postmasters the option to take on a post office
which provides a range of services better tailored to their business and the needs of their local
community.
Full-service post offices — with all mails and cash services - will continue to be the default.
But we will also offer a small number of clearly defined, but different, formats to complement
franchisees’ business models.
For instance, we are already piloting an Express format with pick-up and drop off for parcels and
Payzone services.
We will keep piloting new formats designed to reflect how the needs of communities and those who
live and work in them evolve.
They will offer the right products and services, in the right place, available at the right time with
longer opening hours wherever possible.
Over time, we can expect the shape of the network will reflect this evolution, as well as its size,
growing to 12,000 post offices by 2025.
Throughout, we will continue to meet the access criteria set for us by Government, ensuring that all
our services remain within local reach of everyone in the country as they are now.
We will also have made further progress in the task, begun decades ago, to become a fully-
franchised business.
Already you are more likely to find a Post Office in a convenience store than a stand-alone presence
on the High Street.
In this deeply challenging retail environment, we must ensure that our estate as a whole is
sustainable and geared towards the interests of our customers and postmasters first.
Post Offices will, even more than now, be anchors on the high street, acting as a catalyst for
improved local economic performance and wider social benefit:
¢ Helping individual customers withdraw cash; online businesses to send parcels anywhere in the
world; and small businesses to deposit their takings.
e Acting as a multiplier for economic activity. A third of people already visit another shop, café, or
restaurant on their trip to the post office, generating an additional £1.1bn to the economy.
e And ensuring that nobody is left behind, particularly customers with vulnerabilities.
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Third, we will innovate in mails, working with more carriers and delivering more of what consumers
and small businesses need.
Following our landmark deal with Royal Mail last December, we have already begun to explore the
significant opportunities which we now have to work with other logistics and courier companies.
Marrying the UK’s most extensive physical retail network with some of the world’s best known and
most efficient e-commerce companies is a recipe for great customer convenience and improved
postmaster remuneration.
Discussions are well advanced, and some trials are already underway.
Seen through this prism, the spectacular growth in online shopping we have witnessed since the
start of the pandemic represents a very sizeable and achievable opportunity for our own growth at
both corporate and branch level.
Fourth, we will secure free, convenient and reliable access to cash in every community.
Where others only see the costs associated with the obligation to maintain a physical network in
communities across the country, I see instead the opportunity and privilege in helping to ensure that
everyone who needs and relies on cash is not left behind.
. We have all witnessed the dramatic take up of payment alternatives to cash over recent years, and
its acceleration over the pandemic.
It is nonetheless the case that millions of people and small businesses in this country continue to
rely on cash to get by every day, and millions will continue to do so over the medium term.
As the number of bank branches and free to use ATMs in the country continues to decline
exponentially, the local post office remains as the one place which can be relied upon.
Relied upon by people to withdraw the cash they need to budget effectively and as the one place
businesses can deposit their takings locally, without closing up and having to travel to the nearest
market town.
For the benefit of customers and postmasters alike we will begin to offer more automated services,
for example depositing larger sums of cash.
Britain is not ready to become a cash-less society, much as the banks would like it to be.
In my view, it is incumbent on Government to ensure that those who continue to rely on it can do so,
and we stand ready to provide them with the access they need, as we have done for the customers
of all the UK’s major banks on a standardised basis since January 2017.
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Fifth, we will build commercial partnerships, to launch new products and services in our branches
and online.
Even in an increasingly digital world, the Post Office network can provide a vital solution for the
provision of many services and prosper in the process.
The Post Office continues to occupy a place of trust and continuity in the minds of many and
provides unparalleled reach across the country.
We are bringing value to new commercial partners like Yoti, a global leader in digital identity
services, with whom we are launching an app, Post Office EasylD, next month.
As the UK emerges from lockdown, this technology, combined with our reach and brand
recognition, will help to facilitate a return to safe international travel.
It will allow people to prove their identity reliably and easily. This could be used to demonstrate
their Covid-19 status to airlines without putting their personal data at risk.
And for those without the means or technical knowhow to achieve this online, we will help them to
do so in branch.
Sixth, we will invest in new branch technology for postmasters and online for their customers.
It will come as surprise to no-one that a cornerstone of my plans to unlock the Post Office’s potential
will be to invest in new technology for our postmasters.
No matter how robust the version, the simple truth is that Horizon has never been a user-friendly or
versatile tool.
As great strides are made in IT every year, its age and inflexibility is brought into sharper relief.
And so our new ways of working with Postmasters will be underpinned by a new IT system, free of
the connotations of Horizon.
It will be simpler, user-friendly, easier to adapt for new products and services, and cloud-based to
ensure easy maintenance and ready interoperability with other systems.
Migrating safely to a new platform at this scale will inevitably take time since we must ensure that
our services continue to be available without interruption. But let’s be clear: the direction is set.
In parallel, significant improvements to our online services will enable customers to begin their
transaction journey at home and complete it quickly and seamlessly in branch.
Automating high value, high volume transactions, especially in banking, will reduce wait times for
customers and enable Postmasters to serve others more rapidly.
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95. For our corporate clients, like the major utility providers, easy to operate products and services will
maximise the benefit to them of the biggest UK-wide retail network in mails & parcels; cash and
banking; bill payments; travel money and related services.
96. They will have new confidence in contracting with the Post Office knowing that our Unique Selling
Point, the Network, is properly supported and equipped to meeting their customers’ needs.
97. Seventh, we will create value for our shareholder with a successful, sustainable and efficient
business.
98. I make no bones about it. Government has been extremely generous to the Post Office in the last
decade, as it has sought to emerge successfully as a business distinct from the now privatised Royal
Mail.
99. That transformation is not complete, but we must continue the path towards self-sustainability for
two principal reasons.
100. ‘The first is, self-evidently, that even Government has only finite resources available in seeking to
meet the seemingly infinite demands placed upon it.
101. The Post Office must, therefore, play its part in freeing up Government funding for other
priorities - whether in the NHS, education or transport - as soon as it sensibly can.
102. The second reason is less obvious, but no less important.
103. A truly self-sufficient and financially sustainable Post Office can begin to address the principal
fault line in its business model.
104. Todo that is must understand and confront the past.
THE PAST — AN IMBALANCE OF POWER
105. I When I joined Post Office in September 2019, like many of you , I was attracted to what makes it
an important and, in many ways, successful business.
106. Our brand holds an enduring value to customers.
107. Our network is truly nationwide. The largest retailer in the UK.
108. ‘In recent years, Post Office Limited had become increasingly profitable although the post
pandemic outlook is clearly challenging.
109. However, in the eighteen months I have led the business, it has become clear to me that many
of our business successes have come at a hidden cost.
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110. Acost which imperils the future sustainability of our business if left unchecked.
111. For too long Post Office Limited has assumed a ‘parent and child’ relationship with its
Postmasters, rather than a partnership of equals.
112. There has been a pronounced imbalance of power in the relationship between us, creating a
situation in which the company has felt that it has all the answers, and has expected postmasters to
follow its lead unquestioningly.
113. The Post Office thought it was always ‘right’ and behaved accordingly.
114. The reasons for this are complex.
115. I think that they date back to being an executive arm of the government providing wide ranging
services to citizens as a custodian of very significant amounts of public money.
116. For those then in charge, accounting for every penny of this came above all else.
117. More recently, reducing reliance on the public purse for investment and subsidy became the
company imperative.
118. And the pursuit of trading profitability became the new mantra, often to the exclusion of many
other considerations.
119. That is not to say that trading profitability is not important. It is.
120. It provides the fuel for investment and change, to improve our services and deliver more for our
customers and staff.
121. But that trading profitability needs to be benefit Postmasters as well.
122. The imbalance of power at the heart of the relationship between head office and individual post
offices has led to a situation in which the interests of postmasters have consistently been overlooked
while Post Office marched on.
123. Let me set out my view of the three factors at the heart of what went wrong.
Culture
124. During the Group Litigation, Mr Justice Fraser issued two judgments.
125. The first focused on the proper meaning of the contract the business had with postmasters.
126. However, I believe that the underlying issues he revealed were cultural, rather than purely
contractual, in nature. Indeed, many of his own comments reflected as much.
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127. For years, it appears that Post Office came to understand the contract as meaning that
postmasters were to be held responsible for whatever happened in their shops in all circumstances.
128. Once the training had been delivered, the operational kit installed and the cash handed over, the
prevailing view was that the postmaster was accountable from that moment on.
129. I Whatever actually happened, if money went missing, the Postmaster was ‘on the hook’ so to
speak.
130. The judgment exposed the mismatch in the capabilities, the information and insight available to
Post Office Limited and individual postmasters, especially smaller independents.
131. I Postmasters were simply not given a fair share of the analysis, the support or the opportunity to
resolve discrepancies.
132. That is reflective of the imbalance of power I identify.
133. The priority appears to have been what mattered to Post Office Limited first, and everything else
came second.
134. _Inso far as it persists, this culture must change — quite simply, we must put postmasters first in
everything we do.
135. Without them, there is no Post Office.
Horizon
136. I The second judgment from Mr Justice Fraser focused on the historical reliability of the Horizon
system.
137. I am not in a position to comment on previous versions of Horizon or their robustness.
138. Butitis clear that, even from the outset, it was at best clunky and ill adapted to its purpose.
139. From my own observations, it seems that Post Office also placed an over-reliance on Fujitsu as a
third-party contractor.
140. This was exacerbated by a relative lack of historic in-house capability in managing this contract
effectively, while too much weight was placed on the assurances received from Fujitsu about the
effective performance of Horizon, and too little on Post Office’s ultimate accountability for it.
141. This is changing.
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Profitability
142. Separate from the two judgements by Mr Justice Fraser, and my observations about culture and
the Horizon system, I think there is a third element that illustrates the cost of the imbalance of
power.
143. This is the importance of trading profitability of Post Office Limited.
144. When the Post Office Limited separated from Royal Mail in 2012, the annual loss was some
£120m.
145. — Reducing this loss and seeking greater commercial sustainability became the overriding priority
of the business and its shareholder, not least to reduce reliance for funding from the Government.
146. By 2016, in just 4 years, a loss had been turned to profit.
147. That’s no mean feat.
148. But at what cost?
149. The problem is that our focus on trading profitability for Post Office Limited is, I am afraid, likely
to have contributed once again to a culture in which the needs and interests of Postmasters played
second fiddle to this corporate objective.
150. The overall remuneration allocated to Postmasters was reduced, and the hands-on support the
Post Office provided them was much diminished.
151. ‘This is now urgently being addressed.
152. But! am acutely conscious that, for many, this comes too late.
153. In two weeks’, the Court of Appeal will conclude a process which is likely to result in many
historical Postmaster convictions being declared unsafe.
154. I was clear that the business could not, and should not, act as a barrier to that outcome in the
vast majority of those cases.
155. I am equally clear that where convictions are quashed, these injustices must be righted swiftly
through appropriate redress.
156. ‘If the Court finds that a large-scale miscarriage of justice took place, we can expect it to carry a
large-scale cost.
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157. The Post Office simply does not have the financial resources to provide meaningful
compensation.
158. I completely understand that Government is keen that Post Office should be seen to be fixing its
own mess.
159. And through the work being undertaken across the business every day to place the needs and
interests of postmasters first, we are doing just that.
160. But financial compensation commensurate with wrongful conviction is a different matter.
161. I am urging Government to work with us to find a way of ensuring that the funding needed for
such compensation, along with the means to get it to those to whom it is due, is arranged as quickly
and efficiently as possible.
162. Acting swiftly would also enable the Post Office to place even more focus on ensuring that there
can be no recurrence of these deeply damaging events.
163. Our success in this regard is, of course, the subject of Sir Wyn Williams’ independent Inquiry,
established by Government for the specific purpose of assessing the progress we are making.
164. AsIhave previously made clear, the Post Office is cooperating fully with Sir Wyn as he carries
out his important work.
165. I believe that the Inquiry will be vital in demonstrating that lessons have been learned and that
the Post Office is changing both for the better, and forever.
166. I hope it will be an important first step in providing reassurance that the Post Office now has in
place the culture and processes to ensure that nothing like this can ever happen again.
167. Atthe same time, let’s again face facts.
168. We must acknowledge the uncomfortable truth that for those most impacted by this scandal,
the Inquiry will not necessarily bring closure in and of itself.
169. ‘There are those for whom its terms of reference are too narrow, or its powers insufficient.
170. I understand that point of view and, for the record, repeat what I have previously said - the Post
Office will co-operate fully with any form of Inquiry Government thinks fit, as we seek to bring a
measure of closure to those affected.
171. — Similarly, and although the parties entered into a full and final settlement of the Group Litigation
in good faith, it has only become apparent through various news reports since quite how much of
the total appears to have been apportioned to the claimants’ lawyers and funders.
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172. Should those reports be accurate, it is at least understandable that the claimants in those
proceedings should continue to feel a sense of injustice, even in circumstances where they also
agreed the settlement in good faith.
173. What if, anything, can be done on these two issues is not for the Post Office to determine or
even within its gift.
174. The Post Office will, however, continue to engage meaningfully and transparently with Sir Wyn’s
Inquiry, and approach any future Court proceedings with the same openness, objectivity and
fairness as it has sought to demonstrate in the Court of Appeal.
175. Failing to display appropriate humility as we confront the wrongs of the past will only serve to
prolong the anguish of those who have been wronged, and prevent the Post Office from building a
positive future on more solid and fair foundations.
176. As reflect on the imbalance of power, correcting the wrongs on their own will not be enough.
177. The danger is that in fixing the problems of the past, Post Office does not make itself fit for the
future.
178. Not least as the world changes rapidly around us.
179. The coronavirus pandemic has accelerated the transformation of the retail market.
180. ‘It has also brought the importance of what we do into much sharper focus.
181. I My job must be to assure a future for Post Office in which it continues to serve the communities
of the UK successfully for years to come.
182. A precondition of success is systematically to deliver the necessary change to rebalance our
relationship with postmasters.
183. While we are determined to remedy the past, we must place equal urgency in our efforts to
reinvent our business model into a partnership which reflects the simple truth that, without them,
we do not have a business.
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THE PRESENT — DAILY FOCUS ON TRANSFORMATIONAL CHANGE
184. Realising substantial and transformational change should be our daily focus.
185. I We should be focused each and every day on making the lives of postmasters better.
186. Todo that we need to be specific about the measures that make a difference.
Modern franchise
187. Weneed to bring franchise arrangements between Post Office and postmasters up to modern
day standards.
188. Those standards must reflect the fundamental fairness at the heart of our relationship and be
set out in plain English
189. And those arrangements must make clear that Post Office has considerable responsibilities
towards Postmasters in making a success of the partnership.
Hands-on Support
190. We must continue to strengthen support to Postmasters.
191. I have already ensured that every Postmaster now has direct support from an Area Manager.
192. We have recruited 15 people and repurposed 34 members of staff from within the business
amounting to an investment of £2 million in our new 94 strong area manager network.
193. Postmasters now have regular contact with someone central to the business, helping with
operational issues, day-to-day advice and hands-on support.
194, Where the need is routine or needed out of hours, Postmasters can self-serve online 24/7 thanks to
the introduction of Branch Hub.
When things go wrong
195. We are undertaking an overhaul of the entire process by which we respond to problems that occur
in branch as, inevitably they will from time to time across a network growing to over 12,000
branches.
196. Our reflex must be to make no presumptions about what might have happened or what might
be responsible.
197. Instead, it is to listen to our postmasters, and work alongside them, on the basis of shared and
equal information, as we look for a solution together.
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198. And the Post Office needs to understand that, in the context of running a small retail business,
even relatively modest-sounding amounts of money make all the difference to cash flow and stock
availability.
199. There is nothing such as a ‘small’ loss when viewed through the right prism.
New IT
200. Weare already taking the first steps towards migrating off the Horizon system for good, in
favour of a modern, cloud-based system which postmasters will find intuitive and easy to operate.
201. Of course, this is not be easy — it will, after all, be among the biggest, if not the biggest, IT roll-
out in the country when the time comes.
202. But the change is both necessary and overdue, and it begins now.
Postmaster voice
203. To ensure we know, and properly understand, what it is that postmasters need, they must have
a bigger voice inside the business.
204. In addition to the two serving Postmasters joining our Board as Non-Executive Directors later in
this new financial year, we have been consulting with Postmasters as a whole about their priorities
in engaging with the businesses, as well as the best means to enable them to do so effectively.
205. Rather than head office second guessing the things that matter most to them, we must hear it
from them first-hand, and ensure that they are more involved on a regular basis to shape and guide
our business.
206. While the consultation process continues, it’s already clear that in areas such as marketing,
product development, and communications, co-creation will become the norm.
Remuneration
207. Postmasters must be fairly rewarded for the essential services they provide to our customers in
every corner of the United Kingdom.
208. — And their remuneration has improved significantly in both the financial years since my arrival.
209. In last year alone, they have shared in an additional £[29] million of remuneration.
210. Average remuneration across the network is up [7]% against last year — quite an achievement
given the prolonged coronavirus lockdowns.
211. There is more to do.
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212. This year we will make further progress as a result of the new Mails Distribution Agreement with
Royal Mail; the introduction of new Pick Up and Drop Off (PUDO) services; and with the conclusion
of Banking Framework Three.
THE FUTURE - A PARADIGM SHIFT TO PROFIT SHARE OR MUTUALISATION
213. All of these changes that are underway are essential to our transformation into the modern,
dynamic, franchise business we need to be.
214. There is no question about that.
215. But I do think the time has come for us to start a conversation about our longer-term goals.
216. In business, a partnership can be defined as a formal arrangement by two or more parties to
operate a business and share in its profits.
217. AllI have described covers the first part of that definition well, but it fails to address the second.
218. — While decisions on our corporate make up and ownership structure are a matter for
Government, as our only shareholder, it is my responsibility to lead the Post Office in a way which
promotes its long-term interests for the benefit of future generations.
219. And, as I reflect on that question, it seems to be that there is merit in considering what might be
achievable if we succeed in the next few years.
220. ‘There are a range of options, and we are not yet in the sort of financial shape needed to
implement any of them.
221. — Whilst trading profit for the financial year 2019/20 reached £86 million; for the year just
completed (2020/21) it is likely to be less than half that because of the pandemic.
222. And our forecast for the year ahead is effectively flat.
223. The immediate priority is therefore to rebuild that trajectory of trading profitability growth and
ensure that Postmaster remuneration reflects the progress we are making.
224. But beyond this, I would welcome a dialogue with Government about a longer-term aspiration
to find a mechanism for profit sharing between Post Office Limited and Postmasters.
225. That would be the clearest demonstration that the imbalance of power, which has been
responsible for so much anguish, is corrected.
226. I do not wish to be misunderstood, nor for people to put words in my mouth.
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227. I am quite clear that this would be the beginning of a discussion, and I do not have any model or
fixed idea in mind.
228. But! do think it is often helpful, particularly in the context of building something afresh, to share
acommon goal.
229. As we seek to adapt and thrive in this disrupted retail market we should become commercially
sustainable, no longer reliant on government subsidy, and ensuring Postmasters share fairly in
success.
230. For Post Office to be in a position, say by 2025, to make this a credible option for the benefit of
Postmasters, their customers and the Government would, it seems to me, represent a genuine
achievement.
CONCLUSION
231. — At this critical juncture for the Post Office I am crystal clear about the direction I want to lead it.
232. The Group Litigation, the potentially unsafe criminal convictions, the issues which gave rise to
them, and the consequences we are still in the process of quantifying are difficult and, at times,
daunting.
233. I On my watch, the Post Office will atone for its past. That is a given.
234. But! am also determined that we will use this moment of fundamental change in the retail
landscape as a catalyst for a fundamental recasting of the way in which Post Office thrives in the
future as a modern franchise.
235. We must strike a new deal with postmasters which recognises that, without them, there is no
Post Office.
236. We must ensure that the formats we offer work with the grain of their business models.
237. We must give them the tools and the support they need to continue to be the best
representation of community-minded businesses this country has.
238. And, as this partnership takes shape and breeds success over time, we must find a way for them
to share, directly, in its profitability.
239. I recognise that this is a significant challenge, but I am certain that through hard work,
determination and no small measure of courage, we can make it happen.
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