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n
The voice of the
UK's post offices
House of Commons
London
SWIA OAA
12 December 2022
Dear Minister
RE: Current Network Issues
Thank you for your time on Monday 5 December, it was a pleasure to meet with
you.
I thought it prudent to write to give more detail, and in some cases, solutions,
behind some of the issues discussed
Business Rates: Currently these are frozen, however there is much anxiety across
the network about when this period ends, as already 70% of our membership are
earning the equivalent of the National Minimum Wage or less. However, 60% of
the NFSP membership pay business rates, currently an unaffordable cost to many
at a time when nearly a third of Postmasters are making no profit from their post
office counters.
Post offices can no longer be a standalone business offering only post office
services without a subsidy from Government. To ensure the post office stays
viable, it requires a successful business to host it.
From NFSP research, members report consistently every month their retail
income is down 11-20% on last year, and in comparison to pre-pandemic 2019.
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Solution: The majority of post offices have a retail element which varies in size. The
NFSP has requested the square footage attributed to the post office for each
office, be discounted due to the general economic interest and community value
of the services provided. The retail element of our members businesses is £2.5bn
per year, while the post office element is £400m.
This solution would also be attractive to our strategic partners, which is important
as we have already seen the impact of closures from CJ Lang and McColls across
UK communities.
Additional Products and Services: Despite being called ‘the front office of
Government’ in the past, government services have consistently been taken from
post office counters over the years. Without these footfall drivers, customer visits
have been declining year-on-year (20 million customers per week in 2020, now
down to around 10 million customers per week). Indeed, this very point has been
highlighted and discussed during Phase 2 of the Horizon Inquiry. Remuneration
for most PO services barely covers the time taken, therefore independent
businesses are ‘propping up’ a wholly government-owned business. PO needs to
be a contributor to an independent office and not a drain on its resources.
If these businesses are threatened so are the staff they employ, as 73% employ
between 1-6 members of staff. To add to this, 53% of Postmasters in the network
take no annual leave throughout the year. Therefore the mental strain colleagues
are under is a pressure cooker that keeps building.
Solution: To ensure the post office network remains sustainable, more services
and products need to be introduced. The recent Post Office announcement
regarding selling Evri products needs to go further and the NFSP is keen to work
with PO and BEIS to realise this potential. We have the mandate from our
members, as when surveyed on this issue, the vast majority stated they would like
to see the expansion of courier and carrier services. This is accentuated even more
by the recent Royal Mail strikes which have had a devastating impact on post
offices at a time seen asa critical trading period.
The NFSP also made the suggestion to Treasury that post offices are given the
authority to issue one-year passports, which would help with the backlog and
help promote post office travel currency.
Relationship with Post Office: In 2020, Nick Read made great fanfare by stating
Post Office were keen to reset the relationship with Postmasters, however from a
2021 NFSP member survey, Postmasters gave PO 5/10 for this resetting. It was also
found that less than a third of our members felt Post Office listened to
Postmasters.
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Solution: The NFSP has been working on a plan to strengthen this relationship via
our Annual Plan, by connecting NFSP Directors with Product Directors in PO.A
closer working relationship between the Directors will help with Postmaster
engagement by bringing PO closer to the issues ‘on the ground’.
Hard to Place (HtP): Following the closure of the Network Transformation
programme in 2018, Post Office now hold a ‘Hard to Place’ (HtP) register. This
covers offices where the Postmaster would like to leave the network, however,
they cannot find a Potential New Postmaster (PNP) due to location, declining
footfall and low remuneration etc. The majority of these offices are in rural
locations.
In 2018, these offices numbered approximately 600, in 2022, there are 189. Each of
these offices receives a small fixed remuneration from PO, which is on a year-to-
year basis. Within the package is an average leavers payment of £80,000 if a PNP.
is found. Too many of our colleagues have been forced to close their post office
due to age or ill health and therefore forfeit their leavers payment. Further, when
the office closes, generally Post Office then replace it with an Outreach model.
Solution: It is the NFSP's view that it would be simpler for Post Office to pay a
reasonable compensation to each office to allow them to see a return on their
personal investment, instead of a precarious year-to-year contract offering
minimal compensation.
In addition, as many rural post offices are replaced by outreach services, we would
like the policy changed so that the remaining HtP offices can leave with full
compensation when replaced by an outreach operator.
Rural and Community post offices: currently receive a small fixed payment from PO.
These are often shops that are the ‘last in the village’, and as such these shops need to
stay open to ensure PO meet their Access Criteria as legislated by Government. Post
offices in urban areas, tend to be on a variable rate of remuneration based on the
number of transactions conducted every month and are not provided for under the
Government subsidy. The cost of providing this part of the network is funded via the
Government's subsidy payments. However, it is now costing Post Office more to provide
this part of the network than the funds it receives from Government. This is income that
could be remunerated to Postmasters on commission-only income.
Further, these variably remunerated Postmasters carry out work for Post Office for which
they receive no remuneration, such as Over Night Cash Holdings (ONCH), Trading
Periods (TP’s) and ‘remming’ cash and stock to and from Post Office cash centres. The
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NFSP is keen to ensure that Postmasters are remunerated for all the work they do on
behalf of Post Office Ltd
Solution: I ask that you call on Government to increase this subsidy so that the
community network are fully funded and so that the rest of the network, which
includes Main and Local models, are not indirectly supporting these offices.
Historical Matters: Nick Read stated that £350m is to be set aside for historical
matters. This cost is to be derived from Post Office's commercial revenues. The
NEFSP believe that due to this commitment, there are insufficient funds to
increase Postmaster remuneration, resulting in Postmasters of today paying for
others’ mistakes of the past.
Solution: We need solutions to give Postmasters confidence that their investment
is secure and that their de facto business partner is committed to securing the
future of the network. Whilst Government spending is understandably under
great strain due to the financial impact of the pandemic and cost of living crisis,
we have two options. The first is to spend a little bit more, in Governmental terms,
to invest in products and services that will attract customers and also the next
generation of Postmasters. Or we can spend a lot buying current Postmasters out
of their contracts so that they can leave the network, and orchestrate a closure
programme, which would allow those who remain a better share of the shrinking
pie. This second part is a question I am being asked more and more frequently.
Banking: The PO network has the potential to be the front office of banking as
bank branches disappear from high streets and communities.
Recently, banks have limited the amount that can be deposited at post offices by
both personal and business customers, citing the FCA's anti-money laundering
recommendations. This not only impacts on the customer, but leads to
frustration, which is generally directed at the Postmaster. Local businesses are
also impacted as they now have to hold large amounts of cash on their premises,
and deposit the cash at the closest bank branch, which is often miles away.
The NFSP was concerned to read in the Minister's letter, that the number of failed
deposits had increased from 7,000 — 8,000 per month, to around 60,000.
Further, the NFSP has recently learned that when it comes to Banking Hubs,
something the NFSP is very supportive of, Post Office are refusing to enable the
NFSP to protect the interests of the Postmasters who will operate these hubs. We
have been told by Post Office “that these contracts are negotiated with the new
operational committee and the industry Coordinating Body.” Any engagement
of the NFSP is purely “out of courtesy.” This leaves these Postmasters at the mercy
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of Post Office and totally unprotected as the contract imposed has not been
scrutinised by the NFSP. This is something the NFSP finds very concerning, given
Post Office's attitude in the past regarding Historical Matters.
Solution: Following Andrew Griffith MP's recent statement during the Financial
Services Bill: “we are also talking about the deposits that are so vital. If our small
businesses in particular are to continue to take cash, they need to be able to
deposit that securely, safely and conveniently.” Government need to work with
the FCA to identify and resolve the risks at post office counters, and to lobby for
the FCA to recommend to banks that the original cash deposit limits are
reinstated.
Given those who will operate the Bank Hub network will be Postmasters, enable
them to be protected via the NFSP as we cannot have a GLO-type situation
develop down the line. We cannot have a situation whereby self-employed
individuals are totally unprotected and at risk from an organisation that has a
history of acting to their detriment.
Remuneration: The NFSP has consistently called for greater remuneration for all
services, but especially for providing banking services. This is a fair request given
the banks save approximately £600,000 for every branch closed. In 2021,
collectively the banks saved approximately £441.6m by exiting high streets and
communities around the country. In addition, banks should be mandated to
provide specific equipment and training required for banking services. This cost
currently falls to the Postmaster, most of whom are already dealing with
escalating costs.
Solution: With the bank branch closure programme announcing hundreds more
closures in 2023, an amended Banking Framework 3 is required which places
some of the savings with post offices. It is only fair that some of the savings made
by the banks should be distributed towards the Postmasters who now provide
the banking services on their behalf.
Consideration should be given to see what other services Postmasters can
provide on behalf of the banks so that those most impacted by bank closures still
have access to face to face services
Working Group: Finally, via the Working Group, the NFSP'’s vision is that
Government, as shareholder, PO, as operator, and the NFSP as representatives of
major investors in the network, can work together to ensure a commercially
viable future for the network and the communities they serve. The NFSP has
asked PO repeatedly for its future strategy so we can communicate this to our
members and set our strategy to align to theirs. We are still waiting.
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This is a brief overview of the current issues facing the network, however should
you require more information, please feel free to let me know.
I look forward to the date of the next Working Group being announced shortly.
Yours sincerely,
Calum Greenhow
NFSP, CEO
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