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To Secretary of State
From Annette Rusling, ShEx Ext GRO)
Date 20 November 2015
Meeting with Tim Parker, Chair of Post Office Limited, 24°" November 2015
Purpose
o. This is an introductory meeting with Tim Parker, who took up the post of Chair of
Post Office Limited (POL) on 1* October 2015. This is the first time you have met
Mr Parker in this role. The objective is to understand Tim’s first impressions of the
business, its challenges, and his ideas on future direction.
Attendees
o Tim Parker (POL, Chair)
o Richard Callard (ShEx, HMG representative on POL board)
Topics likely to be raised by Tim
o POL’s freedom to operate commercially
o Banking framework and negotiations with the major banks
o Apprenticeships
CC list
o Baroness Neville-Rolfe, Perm Sec, George Freeman, SpAds, Richard Callard
(ShEx), ShEx POL team.
Annex A
Tim Parker biography
Annex B
YTD performance information
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AGENDA FOR MEETING — NOTES ON LIKELY TOPICS RAISED
¢ As apublicly owned business POL faces constraints that
prevent it operating as a purely commercial enterprise. These
include:
o Public Procurement processes
o Working capital / external borrowing arrangements
o Remuneration / appointments approval
e We expect POL to operate commercially but there are certain
constraints that all government owned businesses have to
adhere to.
Freedom for POL
to operate
commercially
¢ Exit payments: The Enterprise Bill includes provisions for
government to introduce a cap of £95,000 on public sector
exit payments. POL are expected to be within the scope of
these regulations and are concerned that the rules may affect
their ability to move quickly in making structural changes at
senior management level if necessary. We have advised POL
that government expects all parts of the public sector to put
these arrangements in place
¢ High Street bank accounts can already be accessed at POL in
one form or other.
e Inthe context of the closure of bank branches, POL has been
working with the British Banking Association and leading
High Street banks to develop a “standardised service” that
can be offered to all High Street bank customers for common
transactions on a more consistent basis. Commercial
arrangements now need to be negotiated.
¢ POL is finding it difficult to progress negotiations,
particularly regarding a change in fee arrangements, as this
involves greater cost for the banks (reflecting the greater
burden falling on POL).
Banking
framework
e For this “standardised service” to deliver an economic return,
POL needs a majority of the banks to sign up. However, some
banks are reluctant to sign up to the new arrangements.
¢ POL might raise the possibility of government exerting
influence on the banks to make progress. This is difficult —
these are commercial decisions being made by independent
businesses. It is not clear what Ministers can reasonably do
apart from encouraging progress.
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Apprenticeships
¢ POL have been working on developing two new
apprenticeship schemes. The first is for direct employees (e.g.
those that work in POL's owned branches and its supply
chain) while the second is for those that work in the agency
network (e.g. sub-postmasters and their employees).
¢ POL is now waiting for HMG's response to its consultation
on the apprenticeship levy before taking decisions on timings,
structure of the schemes and numbers.
¢ Asa publicly owned business it is important for POL to take
a lead on apprenticeships, and to set an example for other
large employers.
e We would recommend you encourage POL to continue
making progress while also setting ambitious targets fora
launch.
Note: POL currently has c.6,700 direct employees, and it works
with more than 10,000 sub-postmasters who in turn employ up to
30,000 people in their independent retail premises.
Spending Review
¢ Subsidy to POL has come down significantly, from a peak of
£210m p.a. to £130m this year (falling to £70m by 2017/18).
¢ BIS submitted a bid to HMT in the SR for POL that reflected:
(i) the legally committed contractual commitment we have
made to POL to 2017/18; and (ii) an indicative funding
requirement for subsequent years of between £50m and £60m
based on the 2013 strategic plan. This appears to have been
secured with HMT over the weekend.
¢ This indicative requirement was developed in 2013 in
expectation of favourable market conditions, which did not
materialise, and there is a real possibility that the funding
requirement beyond 2018 is higher (if POL is to be able to
maintain the c3000 rural/non-viable branches manifesto
commitment) .
¢ We have noted in the settlement with HMT that the post 2018
funding of POL will need to be more meaningfully
considered next year, although clearly any case for greater
funding will need to be very clearly justified and articulated.
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IF NEEDED: Background and other notes
Background on POL
o There are over 11,500 post office branches in the UK, with the Post Office network
at its most stable for over two decades.
o Government has invested almost £2 billion in funding POL since April 2011 to
sustain and modernise the network ensuring communities have access to services
and that POL remains viable in the future. This includes £640 million for the period
running from 2015 to 2018.
o 93% of the national population (and over 95% in urban areas) live within one mile
of their nearest post office branch.
o Around 18 million customers & a third of SMEs visit post offices every week.
o Post Office Ltd was separated from Royal Mail in April 2012, and is an independent
company. It has a long term commercial agreement with Royal Mail to provide
access to Royal Mail services at post office branches.
Horizon IT System
o Tim Parker agreed with Baroness Neville-Rolfe that he would undertake a review
into the Post Office “Horizon” IT system and various claims that subpostmasters
have been wrongly prosecuted as a result of faults in the system. Tim has appointed
a QC to assist him in that review, and expects to report back to Baroness Neville-
Rolfe early in the New Year.
o We do not expect Tim will want to discuss this matter in detail. The government’s
position is that, while Tim is undertaking his review, while Post Office continue to
work through mediation of individual cases, and while the Criminal Cases Review
Commission considers the c.20 applications on this matter, it would not be
appropriate for government to intervene.
Consumer Futures (CF)/ Citizens Advice (CitA)
o CF isa statutory consumer protection body with a general interest in “consumers of
postal services” and may investigate “any matter relating to the number and location
of public Post Offices”. The organisation was subsumed into CitA in April 2014.
o CF has played the key role in overseeing the public consultations on changes to post
office locations.
o. The step up in numbers of consultations related to Network Transformation (NT) has
been matched by a step up in the numbers of CF case workers. CF’s increased
scrutiny is beginning to create friction and frustration with the risk that this will
impact POL’s ability to meet NT targets.
o More troubling is CitA’s research programme which, through its narrow focus on
POL is lacking a strategic context to their findings.
o ShEx continue to challenge CitA’s effectiveness will continue to do so as we move
into reviewing CitA’s work plans for next year.
Potential Industrial Action
o. There is a potential industrial relations dispute with the Communication Workers
Union (CWU) over Christmas Eve working.
o The CWU represents c.4,000 Post Office workers, most of them working in Crown
post offices. Traditionally Crown post office workers have been allowed to go home
at 12.30 on Christmas Eve while being paid for the full day.
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POL does not believe this is sustainable and wants to open until 4pm in order to
better meet the needs of its customers.
The majority of agency (non-Crown) branches are open during these hours on
Christmas Eve and aligning the offer presents a better image of the business to
existing and future customers.
Recognising that this early closure has been a traditional benefit, POL offered staff a
one off £50 payment and 3.5 hours time off in lieu.
It is not clear what the exact parameters of any strike action could be, though POL
planning assumes this would be limited to Christmas Eve itself, either the afternoon
or the full day.
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Annex A
Tim Parker biography:
e Mr Parker started as Post Office Limited (POL) Chair on Ist
I ! October 2015.
i Ie He replaces Alice Perkins who stepped down in July 2015. Neil
; G RO i McCausland had been interim Chair (having been Senior
I Independent Director).
ie Mr Parker is the current Chairman of the National Trust and of
I ' Samsonite. He has also been:
I = CEO of Clarks, Kwik-Fit, the AA, and Samsonite.
= Chair of Channel Nine TV in Australia and the Autobar
Group, Europe’s largest vending company.
= A non-executive director on the Boards of Legal & General,
Alliance Boots, and Compass Group.
= A director and now owner of the British Pathé film archive.
Annex B
YTD performance information:
hi
1516 first 5 months’
performance.pptx