UKGI00007417
UKGI00007417
Killer Facts on Post Office Limited
There are over 11,600 post office branches in the UK. The Post Office
network at its most stable for over two decades.
Around 18 million customers & a third of SMEs visit post offices every
week.
Government will have committed nearly £2 billion during the period
2010 to 2018 to modernise and sustain the network.
This investment has modernised over 6,500 branches with another 800
more signed up to transform.
These modernised post offices are offering over 200,000 additional
opening hours per very week across the UK.
There are now over 4,100 post offices open on Sundays making Post
Office the Uk’s largest Sunday retailer.
Over the last four years Post Office’s losses have dropped from £120m
to £24m this year. Over the same period the subsidy needed to sustain
the business has dropped from £210m to £80m this year.
During this same period independent research shows customer
satisfaction with the Post Office has been consistently over 95%.
Access to branches is meeting standards we set - 93% of the national
population (and over 95% in urban areas) live within one mile of their
nearest post office branch.
Government has also committed to secure the future of 3,000 rural
post offices, and has provided a dedicated £20m fund for the 3,000
Community Branches, which are usually the last shop in a rural
location.
On Government services, Post Office has won a cross-government
framework contract, running to 2020. DVLA, HM Passport Office and
DWP use this framework for their services at post offices.
Page 1 of 45
UKGI00007417
UKGI00007417
Industrial Relations (CWU and Unite campaign — “Post Office in
Crisis”) and campaign for a summit
Top Lines
e There is no need for a summit to reflect on strategy as the business
is not in crisis.
e Rather, it is on a successful course to sustainability with decreased
losses, decreased reliance on subsidy and the most stable network
in years.
Q&A
Why isn’t POL growing the business?
e While Post Office operates in a difficult high street retail
environment, it is successfully getting a grip on costs while trying
wherever it can to grow — and has had success with financial
services and online identity.
e But we must be clear that even growth areas like banking are very
competitive and can have very tight margins. There is no magic
bullet in financial services or any other service that can totally
mitigate the effect of the changes we are seeing on British high
streets or prevent the changes POL needs to make to adapt to
them.
Why won’t POL engage meaningfully with its staff?
e Post Office consults thoroughly with its staff and their unions on
both the general direction of the business and specific changes.
Page 2 of 45
UKGI00007417
UKGI00007417
e The business has also offered the unions the chance to put any
proposals it may have to boost the business to its senior
management team and the Board. The unions have not taken up
this offer.
e In addition to these opportunities we are running a consultation on
the Post Office network to refresh our understanding of what the
public expects from the network. The Post Office’s unions are key
stakeholders and have been invited to contribute.
Surely you want to stop the impact of strike action by calling a
summit?
e No one wants to see further strikes, but the business is well
equipped to cope with a repeat of the recent strikes. These had a
negligible impact on the public with over 99% of branches open as
usual.
e Given Post Office’s continually improving performance, we do not
consider there to be a need to intervene in the industrial dispute
between the company and the unions. I would encourage the
unions and the company to continue with their dialogue to continue
making the Post Office a success.
Background
Strikes
e Strikes have been in protest at job losses in the Crowns, supply
chain and some other central functions, and also the proposed
closure of the pension scheme.
e Turnout for the strikes, and voting, has been low.
Page 3 of 45
UKGI00007417
UKGI00007417
e In addition to the strike actions, each strike was accompanied by a
political demonstration — a small protest on Westminster green on
15 September and a similarly sized protest on 31%' October
outside BEIS offices and POL’s central support office with a hearse
to symbolise their view of the death of the Post Office.
Page 4 of 45
UKGI00007417
UKGI00007417
Job losses at the Post Office
Top lines
e I appreciate that the changes in train at the Post Office are difficult,
especially for staff where these involve job losses.
e However we should remember that Post Office is a good employer
and consults thoroughly with staff on each change. Where it can,
Post Office seeks to secure preferred options for its staff from a
change - be it to transfer to a new employer or to leave the
business with compensation.
e We should also remember that many Post Office changes will
create new jobs in other businesses — such as in a newly
franchised WHSmith.
e We should also remember that while staff reductions amongst the
c6,000 employees in the core team are difficult, a more efficient
business secures it for the longer term. This means the business is
better able to compete for new business and retain current
business such as preserving POL’s position as the preeminent
mails service.
e Importantly this will make more secure the c50,000 jobs created in
local post offices up and down the country, and help to secure Post
Office’s continual presence on the high street.
Page 5 of 45
UKGI00007417
UKGI00007417
Background
e Job losses have predominantly been in the cash supply chain,
crowns, and headquarters.
e The number of jobs will go from 6,500 to 4800 by March next year.
Page 6 of 45
UKGI00007417
UKGI00007417
Changes to Crown Network
Top Lines
e The Post Office’s proposals for franchising and hosting some of its
Crown branches are part of its plans to ensure its branch network is
sustainable and profitable in the long term and fits the future needs
of the business and its customers.
e The proposals to franchise or host further Crown branches are part
of an on-going improvement plan which has shifted its Crown
branches from a £46m loss in 2012 to nearing break even.
e But more work needs to be done. There continue to be Crown
branches which are loss making and which require subsidy. Others
could be made more profitable still.
e This will help keep Post Office services on our high streets
throughout the country and bring further investment for customers.
e The change from a Crown to a franchise or host branch has been
undertaken previously in many locations across the UK and is a
successful way of sustaining Post Office services in these
locations.
Lines if needed/Q&A
Drop in quality of service in franchised Crowns
e The Post Office is committed to ensuring all branches across its
network offer excellent customer service and has a strong history of
working with its many franchise partners and agents to achieve it.
e Independent research undertaken by the Post Office shows
customers are happy, with satisfaction levels consistently high at
Page 7 of 45
UKGI00007417
UKGI00007417
over 95%. Mystery shopping of Crowns and former Crowns show
they offer comparable quality.
e It should also be remembered that the Post Office’s franchise
partners, such as WHSmith or McColls, are very experienced
retailers who are focussed on delivering good customer service.
The success of their businesses depend on it.
e There is also the opportunity to retain staff from the existing branch
also have the opportunity to transfer to the franchise branch if they
wish and some do so.
Criticism of loss of services in franchised Crowns
e When it creates a new franchise to replace a Crown branch Post
Office will usually offer the same set of services as the existing
Crown branch.
e There may be some occasions where local factors might affect this
— as the provision of Post Office services is the operational
responsibility of the company these are for the business to resolve.
Replacing good jobs with minimum wage or zero hours contracts
e Post Offices run on an agency branch basis comply with UK law on
staff pay. Those on the National Living Wage will benefit from
increases in that wage over the coming years..
e Zero hours contracts are not widely used in Post Offices. For
example, WHSmith has only used zero hour contracts for about 20
students who requested this approach to fit in with studies.
Criticism of previous investment in Crowns that are now
subsequently being franchised or hosted
Page 8 of 45
UKGI00007417
UKGI00007417
e The Post Office regularly invests in all of its branches to ensure
they are in modern and secure retail environments.
e Investment made will have benefitted customers and staff and
some of that investment will be transferable, for example such as
with re-use of equipment and IT.
Why not use the host model exclusively rather than franchise?
e While the hosted model allows staff to remain Post Office
employees, sited within a retail premises like WH Smiths, the
decision on whether to host or franchise will vary depending on the
balance of costs and revenue at each branch.
e Decisions on which model to adopt are the operational
responsibility of the Post Office which seeks to get the best long
term solution for each location.
Privatisation by the back door
e Over 97% of the UK’s post office network is already operated
successfully on a franchise or agency basis. This has been the
case for many years.
e Post Office Limited, which remains wholly owned by the public, will
continue to manage and oversee the national network.
Why does Post Office refuse to meet or consult on changes?
Page 9 of 45
UKGI00007417
UKGI00007417
e Post Office does consult on every planned change to the location
of a branch.
e The business runs a 6 week local consultation to make customers
and the local community aware of the detail of its plans and to seek
feedback. The Post Office takes into account all feedback received
before reaching its final decision and often runs local meetings
where needed to explore local concerns.
e [If required: However, where Post Office is asked to meet before it
has a viable proposal it will usually decline to meet until there is a
clear proposal to discuss as part of its standard engagement.]
Criticism of Post Office or franchise partners undertaking
recruitment or planning process in parallel with consultation, before
decision made
e It is normal for potential franchise partners to undertake planning
activities and start recruitment processes prior to the end to the
consultation period in order to be ready to proceed as quickly as
possible.
e This is in the interest of the host business and the Post Office to be
ready to move quickly on something which will benefit both
businesses and benefits the community who will have a greater
idea of the type of branch being proposed (e.g. from more
formalised branch layout plans etc).
e However, all activity is undertaken on the condition that it is subject
to the outcome of the formal consultation. This includes any offers
of employment which are only formalised if the consultation process
Page 10 of 45
UKGI00007417
UKGI00007417
stage is passed. Therefore this in no way affects the consideration
of the feedback or pre-judges the decision of the Post Office.
Background information
e There are currently just under 300 directly managed and run
‘Crown’ branches within the network which makes up less than 3%
of the overall network
e Despite investment in these locations, these branches can still be
loss making or are not as profitable as they could be. Often the
best way to make sure that customers continue to have a main
Post Office into the future is to seek to franchise these branches or
provide a hosting solution (hosting is where the Post Office
occupies the space in the branch and continues to directly operate
the post office and employ post office staff).
e This puts them on a more sustainable basis as Post Office
effectively shares staff and property costs with a successful High
Street retailer, often, but not always, WHSmith. More often than
not it also puts the new branch in a better location on the high
street for customers. Often the high street has moved away from
the old Crown office building.
e In January 2016 The Post Office announced that it would be
seeking a franchise partner for a number of its Crown Post Office
branches and would also be carrying out a consultation on
proposals to close 3 branches.
e There are currently 83 projects underway (3 closures, 49 franchises
and 31 hosts). 43 decisions have been announced and of those 24
Page 11 of 45
UKGI00007417
UKGI00007417
changes have been completed. There are 15 live consultation and
5 closed pending a decision.
Many of these latest changes will involve WHSmith. In April 2016
the Post Office announced that it had entered into a new
agreement with WHSmith to relocate up to 61 branches into
WHSmith stores over the following 12 months, including a number
of franchises and hosted concessions. WHSmith already operates
107 post offices.
Relocating more Post Office branches into the UK retailer's
modernised stores will keep services on high streets throughout the
country and bring further investment for customers.
The MP split of the publicly announced 95 planned hosts or
franchises (includes the projects which are not yet underway) is - 47
Con; 36 Lab; 2 LD; 2 SDLP; 7 SNP; and 1 UUP.
Page 12 of 45
UKGI00007417
UKGI00007417
Supply chain
Top Lines
e The changes to the Post Office’s cash supply chain will mean the
business can deliver the same service to its branches for less
overall cost.
e Post Office cannot realistically compete for external business
against competitors who have lower pay and more flexible working
conditions.
e Itis also difficult to make a case to invest in what is a declining
market for cash with the rise of electronic payments like
contactless.
e Post Office believes it will only be able to deliver the expected
savings by adopting a clear and consistent policy of completely
exiting the external market, and focus on delivering cash to their
own network.
Lines if needed/Q&A
Why is Post Office spending money on lawyers to fight retaining
profitable business? (Choice International case)
e Money remittance service Choice international does not feel it can
operate without Post Office continuing to provide cash handling and
banking.
Page 13 of 45
UKGI00007417
UKGI00007417
e So Choice has sought and been awarded an injunction to prevent
POL from withdrawing service (granted until 27" November).
However, this injunction was made on commercial terms favourable
to POL.
e It is not yet clear whether Choice will secure longer term service
from Post Office on those terms.
e While Choice generates a modest revenue stream for Post Office,
making an exception for them would create a precedent that the
business would have to serve other companies in this sector. This
would place a considerable overhead on the business and expose
it to significant risk (some other money service providers have been
investigated for links to money laundering and links to international
terrorism).
e As always the business has the commercial freedom to review its
decision in light of experience and taking into account the balance
of risk.
Background
Supply chain changes
e Post Office will close 9 cash handling facilities (out of 25) and
reduce headcount by c600 (out of c1350 posts).
e When these changes are complete this will save the business
millions each year.
Page 14 of 45
UKGI00007417
UKGI00007417
Pensions
Top Lines
The independent trustees have agreed that the Post Office’s
defined benefit pension scheme should close on 31st March 2017.
This shows that the true state of the pension is not as healthy as
presented by the unions and that even pending the formal valuation
(which is expected shortly) that the pension should be closed to
prevent going into deficit.
Closure will prevent the possibility that Post Office would have had
to increase its annual contributions by £40m p.a. just to keep the
pension open.
Closure in 31% March 2017 will also assure pension benefits earned
by staff up to that time.
Post Office acted prudently before the scheme could fall into deficit
and ran a thorough consultation and extended it twice to allow
sufficient time for discussion.
In 2012 the Government relieved the combined Royal Mail and
Post Office pension scheme’s deficit to the tune of £10bn. The
current scheme remains unsustainable, and the scheme’s trustees
agree.
Page 15 of 45
UKGI00007417
UKGI00007417
Lines if needed/Q&A
Why won’t Government bail out the pension/it created the problem
in 2012 with separation from Royal Mail.
e Government has already relieved the Royal Mail and Post Office
pension scheme of £10Bn of unfunded deficit back in 2012.
e This changes left the scheme fully funded on the planning
assumptions available at the time, but given the generous terms of
the scheme combined with factors like increasing longevity, the
scheme is increasingly unsustainable.
e With all the other calls on Government funding no further help can
be provided to the Post Office for the pension.
Criticism of POL closing the pension while still in surplus/stealing
member’s money
e The decision to close the defined benefit pension has been taken
by the independent trustees of the pension. Therefore they agree
that without this action the scheme would soon fall into deficit.
Closing it now will assure the benefits built up before 31t March
2017.
e While closure in March next year should prevent a deficit occurring,
should market conditions mean that there is still a small surplus in
the scheme then this will be used to fund other member benefits as
agreed between the trustees and the business.
Page 16 of 45
UKGI00007417
UKGI00007417
Criticism of what will happen to staff when the pension closes.
e The 3,500 staff affected by closure of the defined benefit scheme
will join the Post Office’s Defined Contribution scheme. This has
been the standard for new Post Office joiners since 2008.
e While the defined contribution scheme will not likely deliver as
strong a retirement income as the defined benefit scheme it is
better than many market comparators e.g. those for retail staff.
Where has the surplus gone?
© Xxx
© XXxx
Background
e The Defined Benefit (DB) pension closed to new members in 2008.
Employees who joined after 2008 are part of the Post Office’s
Defined Contribution (DC) scheme.
e Once the DB scheme is closed its 3,500 members will move to the
DC scheme.
e Royal Mail has c 90,000 staff in its DB scheme and has given an
undertaking that no changes will be made to this pension until
March 2018.
Page 17 of 45
UKGI00007417
UKGI00007417
e However, Royal Mail's pension is in the same position as POL’s
and RM has written to staff to start the discussion about what
changes may be needed after 2018.
Page 18 of 45
UKGI00007417
UKGI00007417
Post Bank and current banking offer
Top Lines
e The Coalition government looked at the case for creating a state-
backed Post Bank and decided that the Government investment
then available would be better used to modernise the network.
e The success of this approach has been seen in the nearly 7,000
modernised branches and the stability of the network.
e While Post Office did not create its own bank it has delivered
almost all of the benefits of a Post Bank through its partnership with
the Bank of Ireland. This has enabled it to offer current accounts,
mortgages and personal savings and to drive growth in this part of
its business.
e For some years, Post Office has provided access to other bank
accounts at its branches. Post Office has been working with the
Banks and the British Banking Association to create a standardised
framework for these services where a set of standard services are
available to all banks via the Post Office.
e This is an industry wide negotiation and positive progress is being
made. Once in place the framework will mean that all banks will
have the ability to offer the standard set of services to both their
retail and business customers if they so wished. Post Office will
make an announcement when the framework is in place.
Page 19 of 45
UKGI00007417
UKGI00007417
e When complete this will be both a fantastic opportunity for the Post
Office and for the communities they serve.
Background
Post Office becoming a Bank
e There would be a significant cost to creating a state-backed Post
Bank, in 2010 this was estimated at more than the 1.34 Bn needed
to fund the modernisation of the network. In addition, having
significant assets and liabilities on Post Office’s balance sheet
would impact Government's own balance sheet.
e Post Office instead put in place arrangements with the Bank of
Ireland (BOI) to offer financial products. While this has been
successful, over time the objectives of the BOI and POL have
diverged somewhat. POL has engaged Macquarie to support it in a
reengagement with the BOI to refresh the joint venture and better
align both businesses.
e Beyond offering its own financial services in partnership with BOI
the Post Office offers to access to third party banking facilities at
post offices.
e At present virtually all UK Debit Card holders are able to access
basic banking services of their provider at any Post Office branch
(cash deposit and withdrawal). The Post Office has worked hard to
achieve this over many years through individual agreements
reached with each of the banks.
Page 20 of 45
UKGI00007417
UKGI00007417
e The ability to access these services at post offices is significant in
terms of customers being able to access cash (without charge)
even in the most remote areas - particularly when bank branches
close.
Page 21 of 45
UKGI00007417
UKGI00007417
Government Funding
Top Lines
e Government accepts that the Post Office network will require
funding in the future, to enable it to continue making important
services available to people in all corners of the United Kingdom”
¢ Government is in discussions with Post Office about future funding
for the post office network. It is important that this is appropriate,
affordable and proportionate, and that it delivers Value for Money”
Background
e Government has committed almost £2 billion to the Post Office
network between 2011/12 and 2017/18 to maintain and transform
the network, and this funding has made it possible to modernise
more than 7,000 branches, extend weekday and weekend opening
hours, reduce the network’s losses and bring down the need for
taxpayer subsidy.
e However as Government requires Post Office to maintain a network
that is larger than commercially viable, we think the business will
continue to require funding in the future. Government's existing
funding agreement with Post Office comes to an end in March 2018
and as such a new agreement will be required for the period that
comes after this.
Page 22 of 45
UKGI00007417
UKGI00007417
e Discussions between Government and Post Office have already
started on this funding and we would expect to be in a position to
make an announcement on new funding towards the beginning of
2017. This will be aimed at making sure Post Office can continue to
operate its network, and to supporting investments in the business
to help it become more commercially sustainable.
Page 23 of 45
UKGI00007417
UKGI00007417
Front Office for Government / Government Services
Top Lines
e The Post Office is the largest provider of counter-based
Government services in the UK.
e In 2013 it won a cross-Government framework contract which
allows all Government Departments and their Executive Agencies
to contract with the Post Office easily and cheaply.
Lines if needed
Criticism Government is not delivering on its commitment to make
the Post Office a front office for Government.
e Key contracts with the DVLA and the Passport Office have been
moved onto the cross government framework that POL won in
2013, as has the Post Office Card Account contract which has been
extended to at least 2021.
e However, Government cannot simply award contracts to the Post
Office: services must be procured competitively to ensure value for
taxpayers’ money. Customers are increasingly wanting to transact
with Government digitially.
e The Post Office is still well-placed to bid for and win important
contracts, with its extensive geographic reach and key role in the
heart of communities.
Page 24 of 45
UKGI00007417
UKGI00007417
e The Post Office is also a provider of identity verification services
online, as part of the Government's “Verify” service. This means
people can choose the Post Office’s trusted brand to verify their
identity when accessing government services online.
Background
e Post Office has an important role to play in ensuring people can
access Government services in the ways that best suit their needs.
But increasingly, many of us prefer to access Government services
online, which can be more convenient for people. Post Office is one
of the largest providers of identity verification through the
Government's “Verify” service.
e Post Office continues to work with both local and national
government to look at opportunities for delivering government
services through the post office network. But contracts cannot
simply be awarded to the Post Office — they must be procured
competitively to ensure value for taxpayers’ money.
e The Coalition government made a commitment to support the Post
Office in its ambition to become a front office for Government. It did
not commit to make it a front office for Government.
Page 25 of 45
UKGI00007417
UKGI00007417
Network Transformation
Top lines
The Government will have invested nearly £1Bn in Network
Transformation between 2012 and 2018 when the programme
closes.
This has helped Post Office shift many post offices from small
standalone branches (which had become unviable without fixed
subsidy) into successful shops, usually convenience stores.
Where an existing postmaster could not convert their branch, the
programme helped the transition by allowing them to leave with
compensation when a replacement host was found in their
community.
Network Transformation has been the key plank in reducing
subsidy, vastly increasing the hours operated, improving retail
performance for hosts (by improving retail environments and
increasing footfall), securing the Post Office’s long term future by
getting agency branches onto a sustainable footing.
Over 6,500 agency branches have been transformed with around
800 more signed up to convert. Post Office expects to modernise
around 7500 agency branches before the programme closes.
Page 26 of 45
UKGI00007417
UKGI00007417
Q&A
Where did £1Bn go? That’s £130k per branch but actual branch
modernisations are a fraction of that.
e The NT programme has covered in store fit outs, compensation for
departing postmasters, programme run costs, property specialists,
commercial experts to help postmasters properly pass long term
business planning tests and programme close out costs.
e One of the largest elements of these has been compensation
where a postmaster can depart with up to 26 months of
remuneration (capped at £200k). This has been an essential part of
managing the process as fairly as possible and ensuring take up in
a voluntary programme has been as high as it has.
e Around a quarter of eligible postmasters have left under this
approach — the majority converted on site or at a new location.
What about those stranded by the programme - those who signed
up to leave but couldn’t because no other retailer could be found in
their community
e Network transformation was not a guarantee of compensation.
Whilst I appreciate that those who have made the decision to go
would like to go we cannot sanction using tax payer money to leave
a community without a post office.
Page 27 of 45
UKGI00007417
UKGI00007417
e As we move to the end of the programme my officials are seeking
proposals from Post Office on how best to address this issue going
forward for this cohort of postmasters.
If the network is so stable why has my local branch closed/been
closed for months?
e The Post Office is made up of small businesses and like any other
is subject to the same problems such as the loss of access to
buildings due to lease arrangements expiring.
e Post Office does have contingency plans in place for maintaining
service provision when this is disrupted but each site has its own
unique challenges and it not always possible to do so.
e Post Office is often able to maintain service provision even in the
worst cases (such as death of a postmaster) but alas not always.
While there may be an extra 200,000 hours overall what about my
local community where the bricks and mortar branch has been
replaced with a part time outreach service?
e Modernised branches are now offering over 200,000 additional
opening hours every week. This is the equivalent of c.4,700
additional Post Offices operating on traditional core hours (with half
day closing on Wednesday and closed Sunday). This is a step
change in access to the network.
Page 28 of 45
UKGI00007417
UKGI00007417
e Nevertheless, where a small community post office closes for
whatever reason, Post Office ensures continued service and will
put in a mobile service- an outreach. While there is a reduction in
hours it ensures continued access in the community and the overall
position on access is dramatically improved from before Network
Transformation.
e Any decision on the provision and location of post offices is the
operational responsibility of the Post Office.
Background Information
e Since 2012 the Post Office has been transforming and modernising
its national network through Network Transformation (NT), bringing
benefits for customers and postmasters and securing its long term
future. The programme is due to conclude by March 2018.
e There were over 8,000 eligible branches for NT (note NT does not
include the c.3,000 Community Branches, or the Crowns).
e NT involves the introduction of new operating models into the
network (Mains and Locals) designed to offer a more efficient and
optimised operation for postmasters and franchisees
e Main Branch - A high-volume model offering customers an
effectively complete range of post office services. A majority of
these are standalone although some are co-located with a retail
business. In converting from a Traditional Branch these post offices
benefit from investment that refreshes branch environments and
extends opening hours.
Page 29 of 45
UKGI00007417
UKGI00007417
Local Branch- A lower-volume model co-located with a retail
business that offers customers an extensive range of post office
services. In converting from a Traditional Branch these post offices
benefit from investment that refreshes branch environments and
extends opening hours. Co-location of the retail till also frees up
space for retail use by removing the old “fortress position’, and
frees up employee time which delivers efficiency and cost-savings
for postmasters.
Transformed branches do not receive fixed remuneration — all
payments for post office services are linked to transaction volumes.
The move to a variable cost and more efficient operational models
for these agency branches has helped reduce the Post Office’s
losses. NT has significantly reduced the reliance of the network on
public subsidy and will continue to do so.
Every branch eligible for the programme is assessed by the Post
Office and each will have a range of local circumstances that apply.
These specific factors create a range of various options for the
branch, from securing investment into the branch to convert, to
attracting a suitable retailer nearby to integrate the service into their
retail (relocation).
Page 30 of 45
UKGI00007417
UKGI00007417
Post Office Network Consultation
Top Lines
e The department is conducting a consultation to understand more
fully what subsidy is needed by the Post Office and what it should
be used for.
e This consultation is an important step in determining support for the
network in the future, once government's existing funding
agreement with Post Office Limited comes to an end in 2018. I
would encourage my colleagues and other stakeholders to engage
with it.
e Nochanges to the network are being proposed through this
consultation, we are seeking to re-affirm that view with
stakeholders.
e The consultation will run for 6 weeks and close on the 21
December 2016
Background
e The funding agreement between Government and the Post Office
expires in March 2018 and to sustain the network of social
branches, i.e. those that cannot operate commercially, we expect
there will continue to be a need for some government funding in
future.
Page 31 of 45
UKGI00007417
UKGI00007417
To understand what stakeholders/customers want out of the post
office network and the taxpayer funding that supports it,
Government has launched a public consultation (the last one being
held in 2007).
Aside from this representing best practice to establish the value
money case for such support, any funding provided by the
Government must be approved by the European Commission.
During the last Commission approval process, Government agreed
to undertake this consultation to refresh the data from 2007 in
relation to the social need associated with the Post Office, which
more easily allows the Commission to approve any state aid
provided.
Since 2010, Government’s £2bn investment in to Post Office has
stabilised and modernised the network, while reducing its need for
subsidy and keeping customer satisfaction high. The nature of the
consultation reflects this - for the most part it is seeking an
endorsement of the current approach to managing the network,
such that it post office policy will continue in a similar vein, with no
changes to that policy proposed. On future services there are
questions seeking input on possible new products and whether
there can be a greater role for communities in the delivery of Post
Office services.
Page 32 of 45
UKGI00007417
UKGI00007417
e tis worth noting that after the last consultation in 2007, a tranche
of closures was announced that saw [cXXXX] closing. This may
create nervousness amongst stakeholders, but there is no intention
for there to be a repeat of that process following this consultation.
Page 33 of 45
UKGI00007417
UKGI00007417
Horizon
Top Lines
e [understand that civil proceedings have been issued against the
Post Office on the matter of the Horizon IT system. This is a matter
for the courts and I am unable to comment further.
e I understand that a number of individuals have raised cases with
the Criminal Cases Review Commission (CCRC). This process is
independent of Government and I will not comment further.
Background
e Following complaints from a small number of sub-postmasters
regarding the POL’s Horizon IT (point of sale) system, an
investigation was undertaken by an independent firm, Second
Sight, over two years. Whilst this received relatively high profile
press attention, no systemic issue with Horizon has been found.
e However, affected sub-postmasters continue to put pressure on
POL, the Criminal Cases Review Commission (CCRC) are
considering some cases where individuals have received criminal
convictions, and group civil litigation is being launched against POL
in the High Court.
e The Court system represents the best place for this sort of dispute
to be resolved.
Page 34 of 45
UKGI00007417
UKGI00007417
Separation from RM/history
Top Lines
e The Post Office and Royal Mail are very different companies and
since separation in 2012, as a separate company with its own
Board, the Post Office has had the commercial independence to be
able to focus on what is best for the business and to adapt and
change to best meet the challenges it faces.
e There is a long term commercial agreement in place between the
two parties and they have been working together successfully since
separation.
Lines if needed
It was a mistake to separate — this has not worked
e Since separation the Post Office has become increasingly
sustainable, with its transformation programme delivering an extra
200,000 opening hours a week across the country and more than
4,100 branches are open on Sundays - directly benefitting
customers.
e Over the last four years losses in the business have declined from
£120m to £24m this year.
e The Post Office is following a successful course to commercial
sustainability under the leadership of CEO Paula Vennells and its
Chair, Tim Parker.
Page 35 of 45
UKGI00007417
UKGI00007417
Separation has led to Post Office closures
e There are over 11,600 post office branches in the UK, with the Post
Office network at its most stable for over two decades.
Background
e The Post Office and Royal Mail were separated in April 2012, as
part of the restructuring of the Royal Mail Group of companies in
preparation for the Coalition Government's sale of Royal Mail plc
shares in 2013 via IPO.
e On separation the Post Office and Royal Mail entered into a long
term commercial agreement (the Mails Distribution Agreement -
MDA) which runs for a period of 10 years (to 2022) — the longest
period permissible under law. The MDA is due for a mid-point
review by both parties next year — which is sensible, to allow them
to refresh and renew their working relationship and take account of
any changes in the market and service delivery since 2012 to the
benefit of both parties.
e Under current legislation the Post Office must remain in public
ownership, except in the case of conversion to a mutual structure of
ownership.
Page 36 of 45
Network numbers since 2009
UK Wide Variance
End March 11643 9
2016
End March 11634 -62
2015
End March 11696 -84
2014
End March 11780 -38
2013
End March 11818 -2
2012
End March 11820 -85
2011
End March 11905 -47
2010
End March 11952 -1615
2009
UKGI00007417
UKGI00007417
Brief History
e Post Office was
originally part of the
General Post Office,
a Government
department (which
also contained Royal
Mail and British
Telecom)
e Post Office Counters
Ltd was created as a
wholly owned
subsidiary of Royal
Mail in 1986,
becoming Post Office Ltd in 2001. It separated from Royal Mail in
2012 using powers in the Postal Services Act 2011.
e The number of Post Office branches in the UK peaked in the 1970s
at around 25,000. It has more than halved since then as
uneconomical branches have closed down.
e There were two big closure programmes between 20XX and 20XX,
where the network decreased in size from XXX to XXX
Page 37 of 45
UKGI00007417
UKGI00007417
e The network has been at its most stable now for decades. There is
however always some churn in the network as subpostmasters
retire or leave the network.
e Insuch cases POL seeks to find a replacement subpostmaster at
the same or alternative premises. Some branches remain
temporarily closed whilst new subpostmasters or premises are
found, which can often cause frustration at the local level.
Luton North facts and figures
Luton North has 10 post office branches in total. All of the branches have
been transformed to new models, 5 Main and 5 Local, providing a total of
297.5 additional hours per week across the area, as shown in the table
below.
Page 38 of 45
UKGI00007417
UKGI00007417
As noted in the press articles on the next page (in bold), Mr Hopkins has
been very complementary about the changes made by the Post Office,
and the articles cite the benefits of network transformation (greater
opening hours, more convenience, brighter stores)
Extra
Sunday Opening
Branch Name Postcode I Type Location Type Open CurrHrs I Hours
Culverhouse Road LU3 1PX_I Local I Urban Yes 84 esd
Runfold LU3 2HX IMAINI Urban 51 Ee as.
Leagrave Marsh Lu3 2NL_I MAIN I Urban 51 6
Limbury Mead LU3 2SZ_I MAIN Urban 59 I 3)
Sundon Park LU3 3AH_I Local Urban Yes 91 45
p Urban LEIS. OS
Purley Centre LU3 3SR_I Local I Deprived Yes 80 42
Lu4 Tes, ( te
Lewsey OHW Local _I Urban Yes _ 85I 38.5)
Lewsey Farm Estate LU4OUN I MAIN I Urban 48.5 I 25
Urban p a
Hockwell Ring LU49PG_I MAIN Deprived Yes _ 96I 46.5
Waller Avenue LU49RP I Local I Urban Yes I 110.5 I 61
Total Extra Hours 297.5
The most recent branches to transform were Runfold (Main), which
converted in March 2016 and Limbury Mead (Main) which transformed in
April 2016. The other branches transformed earlier in the programme
and Kelvin Hopkins MP attended the opening of Hockwell Ring Post
Office in 2014 and Sundon Park Post Office in 2013. (Please see press
coverage below)
In terms of other interaction/contact with the MP, neither POL nor UKGI
have received any correspondence from Mr Hopkins on Post Office
matters in his constituency. POL’s Public Affairs Manager contacted his
office last week off the back of the EDM and offered a meeting but are yet
to receive a response.
Page 39 of 45
UKGI00007417
UKGI00007417
Press coverage of MP’s attendance at branch openings in
Luton North
Hockwell Ring Post Office — opening 2014
Page 40 of 45
UKGI00007417
UKGI00007417
THE new look Hockwell Ring Post Office was officially opened by Kelvin
Hopkins MP for Luton North on Monday.
The modernised Hockwell Ring Post Office at 1 The Green, Hockwell
Ring, Luton, LU4 PG now has three modern screened positions and a
Post Office serving point provided for use at the retail counter.
This is a new concept for delivering Post Office products and services
available alongside retail transactions during shop opening hours.
Customers benefit from the branch being open every day - an extra 46.5
hours a week.
Selected Post Office products and services will available during shop
opening hours, which are Monday to Saturday: 06.00 — 20.00 Sunday;
06:00 — 18:00. The extra opening hours include Saturday afternoon and
the branch opens significantly earlier and closes much later every day.
Kelvin Hopkins MP said: “I welcomed the news that Hockwell Ring
Post Office was to be modernised and I am delighted to be here
today to congratulate Subpostmaster Abu Jahangir.
“The Post Office is vital to the community and I’m sure the new
improved office, and significantly longer opening hours from early
morning until mid-evening will be warmly welcomed by all of my
constituents.
“It is great that the branch is open daily as it is far more convenient
for customers.”
Post Office subpostmaster Abu Jahangir who has been Subpostmaster
for 13 years, said: “The branch used to be very dark. Now it is much
brighter, lighter and modern. It looks excellent.
“Customers and staff really like the look and the longer hours.”
Gary Herbert, Post Office Senior Stakeholder Manager, said: “We
understand how important having a Post Office is to residents around this
area of Luton and I am confident that this new modern Post Office will
meet the needs of the local community and secure services for the future.
“The modernisation is part of a major investment programme to convert
the Post Office network to new-style branches and this investment, the
largest in the history of the Post Office, makes a commitment to no more
branch closure programmes.”
The Post Office, now independent of Royal Mail, is the largest retail
network in the UK, with over 11,500 branches. It is also one of the fastest
growing financial services companies and is developing its online and
telephony services.
Page 41 of 45
UKGI00007417
UKGI00007417
Sundon Park Post Office — opening 2013
- Cllr Syd Knight, Baldev Dhillon, Kelvin Hopkins, MP, Gurbant
Dhillon and Debi Fane , Post Office field change advisor
A POST Office branch which relocated and underwent a refurbishment
has officially opened.
The branch, which moved from 150 Sundon Park Road to the Nisa
convenience store at 154-6, also on Sundon Park Road, opened this
Wednesday (August 21).
Kelvin Hopkins, MP for Luton North, cut the ribbon during the ceremony
and was joined by Gurbant and Baldev Dhillon, the two brothers who run
it with their wives.
The MP said: “I am delighted to be opening this refurbished post
office, which is at the heart of the community.
“The Dhillon family is already well-known in Sundon Park and they
really care about the community so it is great that they have taken
on the Post Office.
“Customers will appreciate the extended opening hours ona
Saturday afternoon, all-day Sunday and evenings too as it gives
Page 42 of 45
UKGI00007417
UKGI00007417
them more choice as to when they do their Post Office
transactions.”
Mr Gurbant Dhillon said: “We have been running this supermarket for the
past 21 years and we are delighted to be able to offer Post Office
services, which are essential to the local community.
“Customers welcome the more modern, cleaner and tidier premises in a
convenient location.
“People can do their Post Office transactions and grocery shopping in the
same place.
“Customers are now getting used to the extended opening hours and
welcome the fact that they now have more choice when they visit.
“Some people prefer to visit in the evening when it is quieter, which
benefits everyone.”
At the opening event the brothers also presented a cheque for £3,600 to
Keech Hospice Care from its Nisa charity giving scheme.
Kelvin Hopkins MP Biography
RELEVANT I
Kelvin Hopkins MP, Labour
MP for Luton North since May 1997
Posts:
- Shadow Secretary of State for Culture, Media and Sport
Jul 2016 - Oct 2016
Page 43 of 45
Committee Membership:
UKGI00007417
UKGI00007417
IRRELEVANT
Page 45 of 45