MAY 2012
POST OFFICE LIMITED MATTERS — DISPUTE RESOLUTION
PRIVILEGED AND CONFIDENTIAL — CLAIMS OVER £500K OR THOSE OF A SENSITIVE NATURE
POL/HF/CD
Rod Ismay of POL
POL has received notification of a
total of five (5) claims from former
subpostmasters (SPMs). Each has
alleged wrongful termination of
contract (based on (1) alleged
defects in POL's internal processes
and (2) alleged defects with the
Horizon system). Each is seeking
damages in the sum of c.£150,000.
Despite reports in the media that
Shoosmiths have consulted on a
further 85 cases, POL has not been
notified of any additional claims.
A third party fraud investigator is to
be appointed (following consultation
with various MPs) to review up to
10 cases where Horizon is alleged
to have caused the losses. It is
anticipated that no further court
action will be taken pending the
outcome of that investigation.
In respect of four of the five clai
Shoosmiths have not taken any further
action to date to progress the claim.
There is no litigation in progress.
POL has been successful in having the
fifth claim struck out and is currently
seeking costs from the former
postmaster concerned.
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Bond Pearce
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POST OFFICE LIMITED MATTERS - TOP 10 CRIMINAL CASES
PRIVILEGED AND CONFIDENTIAL,
DESCRIPTION
[TOTAL VALUE.
STATUS.
RECOVERY
[Subpostmaster of Fairway Post Office, Port Talbot to be prosecuted for theft plus fraud plus
Retriant order applied for.
£85,872.07Ito issue summons
Birmingham Subpostmaster pleaded guilty to theft. Sentenced to 8 months’ imprisonment
suspended for 2 years with 200 hours unpaid work.
£20,000ICASE COMPLETED
}£5,000 compensation and £1,000 costs
Officer in charge at Crown Office at Swiss Cottage found guilty on 2 counts of theft.
confiscation proceedings fixed for
£46,500)23 July 2012.
[Compromised confiscation figure of £46,500 (not index-
linked) plus costs being considered with payment out of
defendant's pension
[A manager employed in the Post Office at London Road in Sunningdale to be prosecuted for
theft.
£27,824.51I
to issue summons
Subpostmaster of Post Office branch at High Wych to be summoned for fraud...
Hearing at Isle of Wight
£38,284.68Imagistrates’ court 25/06/12
ISubpostmaster at Midway House pleaded guilty to theft.
Defendant sentenced to 2 years’
£23,399.31Iimprisonment concurrent,
Confiscation time table set to recover £23,399.31
[Subpostmaster at Droylsden prosecuted for theft.
£406,515.43IHearing 6/07/12
Confiscation time table set to recover £406,515.43
Nominated Subpostmaster at Ileybrook Square Post Office pleaded guilty to theft.
Defendant sentenced to 20
£114,095.00} months’ imprisonment
Confiscation time table set to recover £114,095.
[Subpostmaster at Broughton Sub-Post Office, Kettering to be prosecuted for fraud
£9,425.90Ito issue summons
[Repaid in full £9.425.90
Two Post Office Assistants at the Fazakerley Post Office, Liverpool admitted covering
shortages by delaying the processing of business deposits to Santander. Case concerned 40
deposit slips being suppressed to total value of £34.115.50
Hearing at Liverpool magistrates’
£34,115.50}court 21/06/2012.
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Post Office Ltd — Strictly Confidential
POLB(12)97
POST OFFICE LTD BOARD
Sealings 16 May — 26 June 2012
Seal Register
The Directors are invited to consider the seal register and approve the affixing of the
common seal of the company to the documents set out against items numbered 797
to 801 inclusive in the seal register.
“The Directors resolved that the affixing of the Common Seal of the Company to the
documents set out against items numbered 797 to 801 inclusive in the seal register
is hereby confirmed.”
Alwen Lyons
Company Secretary
26 June 2012
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POST OFFICE LIMITED
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Date . 7 Company Number
26/06/2012 Register of-Sealings pay 154540
Seal Number Date of Date of Persons Attesting Destination of
/ File Ref. Sealing Authority I Description of Document To Document Document
797 23/05/2012 23/05/2012 I Lease of premises at 26a Wellington Road, Rhyl, Helen Perkins to Jean Reynolds
Denbighshire LL18 1AD
798 23/05/2012 23/05/2012 I Rent Deposit Deed relating to premises at 26a Wellington Helen Perkins to Jean Reynolds
Road, Rhyl, Denbighshire LL18 1AD
799 23/05/2012 23/05/2012 I Deed of Variation (in duplicate) between the Landlord (The I Helen Perkins to Jean Reynolds
Mayor and Burgesses of the London Borough of
Redbridge) and the Company as Tenant, in respect of the
Ground Floor Lock-Up Shop known as 203 and 205
Manford Way, Hainault
800 06/06/2012 06/06/2012 I Supplemental Agreement (in duplicate) relating to Helen Perkins Denise Reid, The Markets
extension of Franchise Agreement for Rutherglen branch branch, 6-16 New York Street,
(Send & Spend Limited) Leeds LS2 7DZ
801 19/06/2012 19/06/2012 I Pursuant to long term loan agreements dated 22 March Helen Perkins to Susan Crichton
2012, a letter (x 3 copies) confirming consent for the
transfer of advances, made to the British Postal Museum &
Archive by Royal Mail Group Limited and Post Office
Limited as Lenders, to a new bank account.
.
Date 26/06/2012 Registered Office: 148 OLD STREET, LONDON, EC1V 9HQ, ENGLAND Page 1
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In Strictest Confidence
POLB(12)98
POLCAG0512
Post Office Limited
(company no: 2154540)
Notes of the Post Office Communications Action Group Meeting
Present:
Paula Vennells
Alana Renner
Kevin Gilliland
Martin Moran
Mike Granville
Ronan Kelleher
Richard Walden
Stuart Taylor
Apologies:
Nick Kennett
Kevin Seller
Sue Huggins
Shane O’Riordain
Guests:
Stewart Fox-Mills
John Willcock
Nick Beal
David Simpson
POLCAG01/05
POLCAG02/05
held at 148 Old Street, London
on 29 May 2012
(PV) Chief Executive (Chair)
(AR) Communications Director
(KG) Network & Sales Director
(MM) Commercial Director
(MG) Head of Stakeholder Relations
(RK) Head of PR & Media
(RW) Head of Corporate Communications
(ST) Head of External Relations, Wales
(NK) _ Director of Financial Services
(KS) Head of Government Services
(SH) GM Network Services & Transformation
(SOR) Communications Director RMG
(SFM) Head of Marketing
(JW) Head of Financial Services
(NB) Head of Network Development
(DS) Head of News, RMG
Previous Meeting Notes
The notes from the previous meeting were agreed.
Action — PV asked ST to ensure that the CAG actions are
captured and shared in the format used for the Post Office
Board Meetings.
Previous Action Points — All Completed
Action — the CAG asked AR to report back on the key Post
Office messaging for the RMG Report & Accounts.
Action — AR to speak to Ronan Kelleher.
Completed
DS suggested that outside of the monthly CAG process then
both communications teams would benefit from a weekly
catch-up.
Action — AR to consider this approach and reply to DS.
Completed
Action — AR to bring back to the CAG the PR approach to be
used to support the wider marketing effort.
Completed
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POLCAG03/05
POLCAG04/05
In Strictest Confidence
Action — MG to ensure that SPAD contact is assimilated into
the wider plan.
Completed
Action - RW to check and feed back to SH.
Completed
Post Office Integrated Comms Plan
The CAG noted and reviewed the Integrated
Communications Plan (May — Sept 2012). The meeting
offered the following observations:
A key event taking place at the end of the month is the ND12
Go On Digital Conference. PV is speaking on Day 1. The
event includes a series of Post Office Champions workshops,
facilitated by Maggie Philbin. It concludes with the
presentation of the Digital Champion of the Year Awards,
presented to Llangadog Post Office couple, Win and Richard
Morgan.
1. Action - PV asked AR to ensure that all the activities
contained within the plan are given both named owners
and detailed completion timescales.
PV asked that a follow-up communication on the subject of
the Scottish Local Authority FOoG session be included on the
plan timeline.
The CAG discussed the likely timing of any mutualisation
announcement from BIS. MG advised that whilst BIS has not
confirmed any specific date, it has been suggested that the
response to the consultation will be issued before summer
recess.
On a wider communication subject, PV asked for a progress
update on the redesign and development of corporate pages
for the website. AR/MM responded by confirming that a
reskin of the website is underway and that the corporate
pages are drafted and awaiting sign-off.
PV stated that the images used at the recent Vision Launch
event did not represent the current brand identity for the
business and these should not be used for other events.
2. Action — SFM and RW to liaise and prepare new style
images and share these with PV.
RMG Comms Update (Verbal Update)
DS provided a brief update on key Royal Mail communication
matters.
RMG Report & Accounts — this is provisionally planned for
publication on the 28 June.
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POLCAG06/05
In Strictest Confidence
3. Action - the CAG asked AR to liaise with Chris Day on
the Post Office submission to the RMG report.
Gold Medal Winners Olympic Stamps — RM is planning to
issue a press release naming the 500 Post Office branches
where the Olympic Gold Medal Winner stamps will be
available. The provisional release timing is mid June. DS
reflected on the good integration between internal and
external communication messaging in support of this major
initiative.
RM Modernisation Programme — the programme continues
apace and DS reminded the CAG of the importance of
ensuring that RM and PO network change activity is shared to
access the potential impact on external customers and
stakeholders.
SFM — suggested that it would be beneficial for RM to
benchmark how Australia Post used the Sydney Games to
leverage business and brand profile.
PV thanked DS for his contribution to the meeting and wished
to place on record her personal thanks and that of Post Office
Ltd for David's advice and support over many years. David
leaves RMG in June. The CAG wished DS well for the future.
Projects Eagle and Polo (Verbal Update)
JW provided a verbal update on the key FS-related projects.
Eagle — it is hoped that the discussions around the Eagle
changes are close to completion. A firm date has yet to be
agreed for communicating the changes.
Polo - a proof of concept pilot is scheduled to start in selected
Post Office branches in East Anglia on the 22 October. Work
continues with BOI on the IT build aspects. It is likely to be
September until a final go / no go decision is made on the
project.
Annual Report and Accounts
AR shared with the CAG the key elements of the approach to
be taken in respect of the preparation and communication of
the full year RMG Report & Accounts. This will be the final
combined set of financial results, and as such, RM will
inevitably dominate the coverage. A press release and press
briefings are being prepared. The Post Office
Communications team is contributing to both the statement
and the supportive Q&A brief. The tactic is for Post Office to
take a low-key approach to the R&A. KG suggested a
challenge to that stance and said that Post Office should be
more proactive and bold in telling our story. AR responded
by reminding the meeting of the complicated external agenda
which is unravelling over the next few months. This includes
the publication of reports of major significance to the
company. Specifically, these include the R&As; the BIS
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POLCAG08/05
POLCAG9/05
In Strictest Confidence
Select Committee report; the Post Office Network Report; and
the report on Mutualisation. The key is deciding whether the
Post Office’s best interests are served by adopting a
proactive or reactive approach to each topic.
4. Action — PV asked AR to compile a more detailed
timeline of the key ticket issues for circulation in advance
of the June meeting.
Handled with Care - PR & IC Plan
RW and RK took the meeting through the PR and IC plan that
supports the ‘Handled with Care’ brand marketing strategy.
The CAG noted and endorsed the approach.
In line with the new brand values of Care, Challenge and
Commit, then a company-wide ‘first line fix’ communications
campaign is to be rolled out. This includes wider business
messages to be inserted into sessions with Subpostmasters,
e.g. Step Branch briefings and Rural Branch Network forums.
5. Action — MM to liaise with Harry Clarke about this
campaign, with the CAG asking MM to join the Customer
Complaints Group.
6. Action — MM shared that it has been identified that an
elevator style Post Office story speech would be really
useful for FOoG colleagues when they meet external
clients and stakeholders. AR to provide please.
June Meeting Agenda
A presentation on the feedback from the Vision Launch and
the workplan moving forward will be presented at the June
meeting.
7. Action — RW to prepare and share a presentation at
the June meeting
At the June CAG, the further elements of the overall
engagement strategy with stakeholders will be shared,
covering; BIS, Other Government Departments, Devolved
Administrations and Special Interest Groups.
8. Action — MG to prepare a paper and deliver a
presentation at the June meeting.
Agenda Standing Items
The CAG agreed that the following should be standing items
on future meeting agendas:
- Integrated Communication Plan Update (Alana
Renner)
- FS Update on Financial Services Projects (Nick
Kennett)
- RMG Communications Update (Shane O’Riordain)
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POLCAG11/05
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AOB
Vision Launch Review
PV recognised the fantastic job that the Communications
team had done in executing the Vision event. In advance of
formal structured feedback, then all of the anecdotal feedback
so far has been overwhelmingly positive. Well done and
thank you to all those concerned.
Action — the CAG asked for a digest of the Vision event
feedback and the wider workplan of how the key messages
are being cascaded throughout the company to be shared at
the June meeting. Action -RW
Justice for Spmrs - engagement with MPs
PV shared with the CAG her recent experience of meeting
with two prominent MPs on their concerns over the accuracy
and validity of the Horizon system, following lobbying from
Subpostmasters at branches where financial discrepancies
have been discovered. PV praised the work of Angela Van
Den Bogerd, Head of Network Services, in meticulously
unpicking the MPs claims step by step and turning an openly
initial hostile stance into one of understanding and
acknowledgement of our position on the cases concerned.
PV stated that the MPs concerned have now asked Post
Office colleagues to meet a larger group of MPs who have
similar complaints from constituents to demonstrate the
robustness of the Horizon system.
DONM: The next meeting will be held at 9.30am on
Thursday, 21 June in Room 107.
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POLB(12)99
POST OFFICE LTD
Post Office Employee Survey Results Topline: April 2012
Overall Summary:
© All employees surveyed in April 2012 (10"-30") with a 76% response rate (5744
responses). This was a 2% decrease from September 2011 (5790 responses).
@ Engagement Index of 64%. This is a 6% increase from the 58% in September 2011.
The February 2010 score was 39% (although this used a different model and survey
provider from the September 14 and April 12 surveys).
@ All 12 Engagement Index Questions increased - with notable increases in support for
business strategy (9 points) and employer advocacy as an employer (7 points).
© Engagement Score above Retail Norm (58%) and RMG overall (56%).
DIRECTORATE SCORES
The Engagement Index is calculated from the average score against the 12 key Zz
questions below. The score represents the %age of respondents who agree with the statement. .
a
No. of responses 5744
Job satisfaction at the present time 73 (67)
Feeling motivated in your current job 66 (60)
My job gives me a sense of personal fulfilment 61 (55)
Post Office gets the best out of me 65 (62)
I support Post Office's strategy and direction 58 (49)
Ihave confidence in the decisions made by the Post Office senior management team 39 (33)
T understand the relationship between my individual goals and Post Office’s goals 63 (58)
Optimistic about your own future within Post Office 55 (47)
lam proud to work for the Post Office 76 (73)
I would recommend Post Office as an employer to a friend or family member. 64 (57)
I would like to be with Post Office in two years’ time 79 (77)
I value Post Office’s culture 67 (62)
Engagement Index 64(58)
Directorate Engagement Index
Communications 88 (NA)
HR 77(80)
Finance 74 (71)
Commercial 72 (63)
Legal and Compliance (inc. MD Office) 67 (67)
Operations 65 (58)
Financial Services 62 (69)
Network and Sales 62 (58)
(Score) = September 2011
Score = April 2012
POLB(12)99
POST OFFICE LTD
Post Office Employee Survey Results Topline: April 2012
Organisational Focus
@ The key areas identified by Ipsos MORI as driving engagement in Post Office are
well-being, talent and development and communication & co-operation. Once
we have the detailed reports available over the coming weeks we will be
forming a detailed organisational action plan.
¢@ We will also develop People Plans by function, informed by both the people
strategy and employee survey results.
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POST OFFICE LTD
Post Office Employee Survey Results Topline: April 2012
Engagement Roadmap
June July I August September Ongoing }
(—
(. Engagement survey > (. Organisational Action plan (. Directorate ) (. Local units with ) © Best
results communicated presented to ExCo (4" July) Action Plans action plans practice
across the business @ Sessions held with each Director created within developed shared and
(this includes individual and lead team to explore survey the framework celebrated
reports for each findings in depth of the people across the
Crown and Supply © Ambassador led focus groups on strategy and business
Chain unit and central b group: incorporating
team) ack of survey to establish survey results
ualitative context to data
NX De \ D\ AN
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POLB(12)100
POST OFFICE LTD
Noting Paper
Post Office Bonus Scorecard for 2012/2013
1.0 Purpose
The purpose of this paper is to:
1.1 Update the Board on the outstanding bonus worthy measure in
the Post Office Scorecard 2012/2013 which was to be confirmed
following the Board meeting held on 23 May 2012.
2.0 Changes
2.1 The Board agreed the Post Office Scorecard and bonus worthy
measures on 23 May 2012. However, the Crown Contribution
Measure was still to be defined.
2.2 The Executive Committee has now defined this measure as
Crown Loss. Appendix 1 shows the full scorecard measures and
targets.
3.0 Conclusion
3.1. The Board is asked to note the definition of the Crown
Contribution Measure as Crown Loss and note that this measure
is subject to bonus.
Pauline Holroyd
June 2012
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Appendix 1
Proposed Scorecard for the financial year 2012/2013
2012-13
Key Performance Indicators Bonus 2011-12
Weighting On plan Target Stretch Outturn
Growth
New 1 £979.7m
2 I Total Net Income (excl NSP) £m £897.9m £895.3m
3 £61.3m
4I Free cashflow £m (£85.3m) (€15.0m)
New 5 I Collections & Returns ability to serve RM (Milestones) 8 N/A
New — 6 I FO0G bid wins (value won vs value bid for) (Rev £m) £11.7m N/A
New 7 I Financial Specialists’ pay to income ratio %?
Customer
8 I Customer Satisfaction 88.0% 86.9%
Changed 9 77.5%
Changed 10 81k
11 105.2%
Changed 12 I Retail Standards (actual) - Top 1k branches 84.1%
13 I Horizon availability 99.6% 99.5%
Changed _14 I Branch - Compliance (new basket) 95.0% 94.3%
Modernisation
New 15 £(46)m
16 64%
New 17 N/A
New 18 N/A
This is a basket of measures covering grade of service, quality and cost and has been re-based.
The threshold and target for Network Conversions are in line with those used in the LTIP scheme.
This is scheduled to be measured from the half year onwards
NB: The performance conditions for the LTIP awarded, April 2012 are Net Income and Deficit Reduction with Network Contract Conversions acting as a
gateway.
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AEI
ARC
ATMs
BAU
BIS
Bol
CAG
cMA
cwu
DVLA
Dwp
Eagle
EBIT
ExCo
FOoG
FRES
FRESH
IDA
IPS
Junction
LDF
MDA
MSA
Mulberry
NFSP
NSP
NT
NTP
Penguin
PID
PO
POCa
POFS
POL
POL IC
Polo
Remco
RMG
RMHB
ShEx
SIA
sLP
SLT
sPMO
UKBA
POST OFFICE LIMITED
GLOSSARY OF TERMS
Application, Enrolment and Identity
Audit, Risk and Compliance Committee
Cash machines
Business As Usual
Department for Business, Innovation and Skills (formerly DT!)
Bank of Ireland (joint venture partner)
Communications Action Group
Communication Managers Association
Communication Workers’ Union
Driver and Vehicle Licensing Agency
Department for Work and Pensions
Bol contract negotiations
Earnings Before Interest and Tax
Executive Committee
Front Office of Government
First Rate Exchange Services
First Rate Exchange Services Holdings
Identity Assurance (Services)
Identity and Passport Services (Passport "Check and Send")
Call centre for Travel Insurance product
Leadership Development Forum
Master Distribution Agreement
Master Services Agreement
Crown Offices' Profitability Project
National Federation of Sub-Postmasters
Network Subsidy Payment
Network Transformation
Network Transformation Programme
Proposal for pre-paid card platform
Project Initiation Document
Purchase Order
Post Office Card Account (designed for receiving benefit, state pensions and tax credit payments)
Post Office Financial Services
Post Office Limited
Post Office Investment Committee
Proposal for Post Office Current Accounts
Directors and senior managers with pay terms previously set by the RMG Remuneration Committee
Royal Mail Group
Royal Mail Holdings Board
Shareholder Executive
Security Investment Authority
Senior Leadership Population - senior managers at the grade below Remco
Senior Leadership Team - top managers within POL (may include Remco, SLP and other grades)
Strategic Project Management Office
UK Borders Agency
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14.45
15.00
15.30
16.00
16.40
1
Post Office Limited
POST OFFICE LIMITED
(Company Number 2154540)
Meeting of the MUTUALISATION SUB-COMMITTEE
to be held at 2.45pm on Wednesday 4 July 2012
at Gatwick Mail Centre, James Watt Way, Crawley, West Sussex RH10 9AA
Governance:
e Committee Chairman
e Terms of Reference
Mutualisation noting paper
Finance workstreams
Stakeholder Forum
e Terms of Reference
Any other business
Members:
Alice Perkins (Chairman)
Chris Day
Alasdair Marnoch
Paula Vennells
Company Secretary
Alwen Lyons
In Attendance:
Belinda Crowe
Simon Baker
MUT(12)1
MUT(12)2
MUT(12)3
MUT(12)4
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Alice Perkins
Belinda Crowe
Chris Day
Paula Vennells
Alice Perkins
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MUTUALISATION SUB-COMMITTEE
MUT(12)14
IPURPOSE The Mutualisation Sub-Committee is responsible to the Board for ensuring that the work to develop proposals
for the mutualisation of Post Office Limited is provided with strategic direction, involves the appropriate level of
lstakeholder involvement and has adequate support, and that mutualisation proposals are presented to the Pos'
(Office Board and Government in line with agreed requirements.
ROLE JOB TITLE CURRENT INCUMBENT
CHAIR Chairman Alice Perkins
MEMBERS Chief Executive Paula Vennells
Chief Finance Officer Chris Day
Non-executive Director Alasdair Marnoch
(OTHER ATTENDEES Legal & Compliance Director (pro tem) Susan Crichton
Strategy Director (when in post) Susan Barton
Consultant support (as required) Belinda Crowe
Mutualisation Programme Manager Simon Baker
ShEx representative (as required) Will Gibson
SECRETARIAT (Company Secretary (or Assistant Company Secretary) I Alwen Lyons (Helen Perkins)
[FREQUENCY I Monthly initially, moving to quarterly once the mutualisation programme is fully established. ]
{quorum [Two Directors
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JAREAS OF CONTROL
. Providing strategic direction for the POL mutualisation programme and its workstreams
. Ensuring that plans are in place for engagement with all key stakeholders including, but not limited to, Government,
sub-postmasters and mistresses, independent agents and POL employees.
. Ensuring appropriate resources have been provided for the programme and workstreams, with due consideration for the}
balance between costs and benefits
. Reporting to the Board of POL, and liaising between the Board, Government and external advisers on progress towardsI
mutualisation.
: Recommending to the Board and Government the framework and optimal arrangements for mutualisation.
SPECIFIC POWERS & AUTHORITIES
jThe Committee shall have access to any executive director or employee of the Company to obtain information or support in order td
ffulfil its objectives.
[The Committee may request reports from the Executive Committee or from any sub-committee of that body involved in operational
decisions which could have an impact on proposed mutualisation.
Decisions with Cash or P&L impact will be in line with existing delegated authorities: decisions with an impact of up to £0.5 million)
on a cumulative basis in each financial year will reside with the Committee; those with an impact over £0.5 million in any financial
ear will require POL Board approval. Examples of decisions with an impact of less than £0.5 million may include:
Approval of Consultancy spend
Approval of amendments to incentive arrangements
(Commitments which may have an impact of a non-cash or non P&L nature may be entered into by the Committee, again in line with
lexisting delegated authorities, up to an estimated value of £10 million. Commitments above this level and all final decisions
concerning a structural change of the business to permit greater stakeholder involvement will require POL Board approval andI
here relevant, notification to and consent from the Shareholder Executive, as set out in the Articles of Association.
REPORTING ARRANGEMENTS
IThe Mutualisation Sub-Committee shall report regularly to the full POL Board on progress towards mutualisation.
Minutes of meetings of the Committee will be provided to the Board for information,
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MUT 12(2)
POST OFFICE LTD
POST OFFICE MUTUALISATION
4. Purpose
The purpose of this paper is:
4.41 To note the latest position on Post Office mutualisation and the
Government's response to its consultation.
1.2 To approve the establishment of an internal POL Mutualisation Programme
Board to develop the next stages of the mutualisation agenda and oversee
and coordinate all mutualisation workstreams.
2. Background
241 On 4 July Government publishes the response to its consultation on
“Building a Mutual Post Office”, launched in September 2011.
The document concludes, in summary *:
+ The purpose of the mutual must be to serve the public benefit.
+ POLwill establish a stakeholder forum to define the public benefit
purpose of the Post Office.
+ A mutual Post Office will be subject to an asset lock arrangement to
protect the public interest whilst giving flexibility for the Post Office to
remain competitive.
+ The constitution of a mutual Post Office should include a mechanism for
the payment of profit distributions, subject to consistency with its public
benefit purpose. Investment requirements to ensure the ongoing delivery
of that purpose should take precedence.
+ Profit distributions should not come at the expense of increased taxpayer
funding for the ‘social’, uncommercial part of the network. The mutual
must be incentivised to ensure as much of the network as possible is
sustainable without reliance on the Government.
+ POLis to work with its stakeholders to consider more detailed aspects of
the mutual model, including the optimal balance of representation ofa
Post Office mutual.
+ The future membership of a mutual Post Office should include staff and
sub-postmasters. There must also be a formal conduit for any mutual to
engage with consumers.
* The summary is correct at the time of drafting this paper but may be subject to change before publication.
A full copy of the final document will be circulated on a “restricted” basis in advance of the sub committee
meeting.
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+ A mutual should include a representative body to provide oversight of the
Board and represent the membership. Its remit and composition will be
defined by POL and its stakeholders.
+ The Board must have the clear autonomy to run the business in a manner
consistent with the mutual’s purpose.
+ A formal transfer of ownership should only take place when commercial
sustainability and financial stability have been achieved and it represents
good value for money for the taxpayer. Working with its stakeholders, the
Post Office and Government should agree the criteria against which the
financial stability and commercial sustainability of the Post Office should
be assessed.
+ Government will retain an ownership stake at least until commercial
sustainability is reached. In the meantime, Government will continue to be
closely involved in the development of the mutual model and the definition
of its public benefit purpose.
+ Government will retain a mechanism to ensure that it can intervene if
required to protect the public benefit, upon a transfer of ownership to a
mutual.
In terms of next steps, the Government Response says:
* The conclusions in this document do not fix a timetable for
implementation of mutualisation. The timetable will be dictated by the
point at which the Government, the Post Office and its stakeholders are
satisfied that it has attained the financial stability and sufficient
commercial sustainability to create a sound basis for transferring
ownership, informed by the Post Office's success in introducing its new
network models and growing its business and dependant on the
successful establishment of a positive culture of working together to
achieve the shared goal of building a successful Post Office that is run for
the public benefit.
+ The generation of a culture of mutualism within the business will be a vital
precursor to any ownership transfer.
+ The Post Office and its stakeholders will build further a culture of
engagement and customer responsiveness.
+ The Post Office will establish a stakeholder forum to recommend a
definition of the purpose of the Post Office for the public benefit.
+ The Post Office and its stakeholders will collaborate to develop more
detailed aspects of the mutual model, including its membership and the
balance of representation; and governance arrangements such as the
role of the representative body.
2.3
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+ The Post Office’s commercial strategy must be introduced successfully with
revenue growth and the introduction of new ‘Local’ and ‘Main’ branch
models.
+ The Post Office, working with its stakeholders, will develop criteria against
which financial stability and commercial sustainability can be measured.
Government will monitor progress against these criteria to assess suitability
for a transfer of ownership.
+ Government must endorse the proposal on a basis that represents value for
money for the taxpayer. As required by the Postal Services Act 2011, the
Government must report to Parliament in advance of a vote on whether to
mutualise.
+ Parliament must debate and vote in favour of the transfer of ownership to a
mutual.
Government has now handed the baton over to POL to take forward the work.
Government want to remain closely involved as the work develops. Proposals
on the detail of mutualisation should be worked through with stakeholders and
agreed by the Post Office Board and Government. This now gives an
excellent opportunity to start to shape and influence mutualisation policy, think
creatively about the options available to us and influence the agenda going
forward.
Proposal
3.1
3.2
3.3
To ensure that all workstreams necessary to inform decisions on
mutualisation are properly steered, developed and co-ordinated, we propose
that POL establish an internal Mutualisation Programme.
The Mutualisation Programme Board will be chaired by the POL Chief
Executive, who will report to the PO Board sub-committee on the work of the
Programme. The Board will comprise relevant members of the POL
Executive Committee and will be supported by a Programme Manager.
The largest and most complicated workstreams are likely to be those
related to finance. These are also the most urgent and it isimportant
that work begins on them at once. As such, they are the subject ofa
specific Committee discussion under agenda item 3.
Recommendation
44
4.2
The sub-committee is asked to note the summary of the Government
response to “Building a Mutual Post Office”.
The sub-committee is requested to approve the establishment of a POL
Mutualisation Programme. Its Terms of Reference and details of the
workstreams will be presented to the next meeting of the sub-committee.
Belinda Crowe
June 2012
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2.2
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Finance workstreams
Purpose
The purpose of this paper is to:
+ Take the sub-committee’s view on the financial issues which need to be
worked through in relation to mutualisation.
* Seek the approval of the sub-committee to establish a financial workstream as
part of the POL Mutualisation Programme to work through the issues and define
financial stability and commercial stability.
Introduction
Whilst it would be possible for POL to undertake mutualisation on an informal
basis now (indeed it could be argued POL has operated on that basis recently
through ColleagueShare & Share In Success for employees and agents), for
POL to become a formal mutual a number of financial conditions would have to
be met.
In particular, in line with the Government response to the consultation ‘Building a
Mutual Post Office’, Post Office Ltd must achieve financial stability and
commercial sustainability before becoming a mutual. It is for POL to define what
that means in practice, working with stakeholders and Government. What that
means in practice requires us to consider in more detail a number of issues.
The main ones are:
4. Government funding would need to be paid on a “service contract” basis
that allows POL to build value and provide an ongoing commitment for the
public good/community service. Currently, POL is effectively paid the
minimum for it to remain a Going Concern during the defined funding
») period, which has often been as short as 12 months. For example, during
the ding period POL’s value will reduce by c£150m. Obviousl
this change may substantially increase POL's funding requirement. This
would probably involve agreeing with Government which branches they will
pay for, how the segments will be defined (eg by profit; by location etc) and
what conditions they will require.
The reason this will be required is to allow value to be obtained from the
subsidised part of the business — in the way the Subsidy currently works,
this is not possible.
2. Cashflow needs to be generative after all costs and distributions. It is
difficult to be specific as to how much this needs to be but for a business
the size of POL £50m to £100m pa would seem reasonable.
The reason this will be required is that, for the business to be sufficiently
solvent that a distribution can be made, it must plan for a positive cashflow
over its plan period.
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3. POL would have to have substantial net assets before it could realistically
distribute — again this is hard to estimate but an increase of £100m to £300m
on POL’s current position would seem reasonable to absorb downsides to
plan.
Again this is required as a buffer in case of a downturn in POL’s business
— the alternative would probably be further funding from government which
would defeat a key objective of mutualisation.
4. The working capital facility would need securing on a long term basis —
currently it is due to expire in March 2016.
This is required to fund POL’s working capital requirements - in particular,
network cash.
5. Identifying options for sources for long term funding.
POL needs to be able to secure funding and capital for investment.
6. How to incentivise branches, specifically the non-profitable branches.
It will be important to ensure that all branches are properly incentivised to
build the business.
Further issues
3.1 If Government funding is paid for a service there may be VAT issues.
3.2 The funding may result in any upside being distributed but downsides
being paid by Government as there will not be any other source of funding
to keep POL solvent.
3.3 Action would be required to restructure POL’s balance sheet so that the
Share Premium could become a distributable reserve — this may require a
court action which would, of course, be in the public domain.
3.4 POL would need to escape impairment before it could distribute.
3.5 It could be difficult to distribute reserves whilst undertaking a large
restructuring programme because of the uncertainty in the near future — eg
even BP stopped their dividends during their Mexico oil crisis.
3.6 The existing funding agreement would need completely re-writing and
probably approving by Brussels even if the amount of money paid to POL >
remained the same.
Recommendation
4.1 The committee is invited to:
e Agree that the lists of issues identified above are the ones that need to
be explored.
e Identify which ones should be dealt with as a priority.
e Agree to set up a workstream as part of the POL Mutualisation
Programme to define what is meant by financial stability and commercial
viability and deal with all the issues listed above.
1.
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Purpose
The purpose of this paper is:
11
1.2
2.
21
2.2
2.3
3.1
3.2
3.3
To request the sub-committee’s approval for the establishment of a stakeholder forum.
To approve the Terms of Reference (ToRs”) of the stakeholder forum. (Appendix 1)
Background/Rationale
In his speech at the NFSP conference in May, Norman Lamb announced that that the Post
Office will set up a stakeholder forum to begin the next steps on the path to mutualisation.
This is confirmed in the Government response to mutualisation published on 4 July 2012
which says: ‘...the Post Office will therefore establish a stakeholder forum. It will be
structured in a way to enable input from the widest ranges of stakeholders, either directly or
through representative groups, including representatives of stakeholders from across the
spectrum of subpostmasters, directly employed staff, multiple retailers who operate Post
Offices, consumers and Government. Its particular focus will be working with the Post
Office to define the business's public benefit purpose.’
The particular focus of the forum will be to define the public purpose of the Post Office,
around which a future mutual could be built.
Government has passed responsibility to Post Office Limited to set up and run the forum.
The conclusions of the forum, in the form of a definition of the public benefit purpose of the
Post Office, will be presented to ExCo, the Post Office Board and then Government.
Proposal
For the forum to be effective, its membership needs to be small enough to enable
meaningful and substantive discussion, but it must be structured and directed in a way that
requires the members to carry out research and consult with those they represent,to ensure
that the forum benefits from the widest range of input. The success of the forum will be
judged on the quality of its work and also the ability of a diverse group of stakeholders to
work together towards a common goal.
To ensure that the forum works in the most effective way, we propose to seek the advice of
a small group of experts in negotiation and engagement: David MacLeod, David Erdal and
Margot Van Boeschoten. A meeting is being arranged with to explain the nature of the task
and the forum and seek their advice, and possibly ongoing assistance, with the
establishment and running of the forum to ensure its success.
The proposed ToRs are intended to:
+ reflect the terms of the Government announcement
+ confine the work of the forum to carrying out the task as announced by Government so that
its effectiveness can be tested before any decision is made in relation to it undertaking any
further work. If the forum works well it could be used to undertake or contribute to further
work on mutualisation. However, work needs to progress on other aspects of mutualisation,
which should also be developed with input from stakeholders at some stage in the
development process.
3.4
41.
4.2.
4.3
44
5.1
5.2
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The forum should be created in such a way that does not preclude other mutualisation
workstreams starting as necessary in advance of the completion of the work of the
stakeholder forum and, where necessary, involving different stakeholders or stakeholder
representatives.
As part of its consultation on “Building a Mutual Post Office”, Government has already hosted
what might be considered the precursor to the Stakeholder Forum. The meeting was chaired
by Norman Lamb, the Government Minister responsible for the Post Office. The membership
of the Stakeholder Forum proposed in the ToRs reflects attendance at this meeting.
Options
The forum will have no decision making authority. It will act only in an advisory capacity.
The forum must use the research already conducted by Government and POL on public
perceptions, customer segmentation etc. rather than commissioning new work.
The definition of the purpose of the Post Office must be agreed by the ExCo and the POL
Board before being passed to Government for approval.
The sub-committee may identify and commission from the Forum new work to inform
mutualisation, as it sees fit.
Recommendations
The sub-committee is requested to approve the proposal for the establishment of the
stakeholder forum and to note the proposed use of external experts.
The sub-committee is asked to approve the Terms of Reference for the stakeholder forum.
Paula Vennells
June 2012
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Appendix 1
TERMS OF REFERENCE
POL STAKEHOLDER FORUM
IPURPOSE [The role of the POL Stakeholder Forum is for POL and its key stakeholders to work together to define the public
purpose of the Post Office to provide a basis for the journey to Mutualisation.
ROLE JOB TITLE
CHAIR Paula Vennells
IMEMBERS Representatives from: NFSP, CWU, Unite, Consumer Focus, Age UK, Local Government, ShEx
(OTHER ATTENDEES (Ad-hoc relevant directors
SECRETARIAT [Mutualisation Programme Manager
FREQUENCY Flexible, as required.
(QUORUM INFSP, CWU, Unite and 2 other representatives
IRESPONSIBILITIES:
\To develop an agreed, clear and compelling definition of the public purpose of the Post Office which incorporates its public and businessI
benefits, in consultation with the widest range of interested parties.
SPECIFIC POWERS & AUTHORITIES (Subject to Delegated Authorities)
This is not a decision-making forum. The conclusions of the forum will be submitted to the POL ExCo and Board and to Government fo!
lapproval.
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