Select Committee on Welsh Affairs Minutes of Evidence

Memorandum submitted by the Post Office


  The paper outlines the current situation as regards the Post Office Network in Wales and highlights strategies and plans for future developments in this area.


  2.1  The Post Office Network in Wales contains the full range of different types of Post Offices, extending from large city centre offices to small community offices open for a limited number of hours each week to meet local needs.

  2.2  The Post Office keeps track of an overall number of post offices which are open and closed across the whole network, however as the offices are managed at a local level and data continually fluctuates due to re-openings, centralised lists are unavailable. Obtainable overall figures though show 1,501 post offices in Wales in March 1999, 1,459 in March 2000 and 1,409 in December 2000 resulting in 50 net closures over the first three-quarters of this year.

  Every quarter the number of post office closures is validated and reasons for closure are investigated to report accordingly to Postcomm.

  Across the UK, for the first three-quarters of this year there were 434 net closures. The national reasons for closures are re-produced on the two tables below. No detailed research has been undertaken into reasons for closures in Wales specifically, although the picture in Wales is considered to closely mirror the natonal picture.
Sub postmaster reasons for closure April-September 2000 %
Subpostmaster retirement—Age/ill health 43%
Financial viability of outlet9%
Change career/business18%
Transfer to other office3%
Result of trauma—Burglary/Robbery 2%
Sub postmaster reasons for closure October-December 2000 %
Subpostmaster retirement—Age/ill health 46%
Financial viability of outlet5%
Change career/business15%
Transfer to other office1%
Result of trauma—Burglary/Robbery 7%

  2.3  Details concerning the situations of the four post offices particularly specified by the Welsh Select Committee are as follows:

  Cae-Hopkins—This post office closed on 12 June 1998, nearly three years ago. The sub-postmaster resigned, did not make their premises available and nobody came forward to operate a post office. The majority of the business from the office has now migrated to a nearby office.

  Fellinfach—The sub-postmaster has decided to retire and an applicant has come forward to take over. At present we see this as a normal commercial transfer taking place and do not expect any break in service to our customers.

  Bwlchgwyn—The sub-postmaster for this post office wishes to retire and will not be making their premises available. Currently there do not appear to be any suitable premises available, however we are currently exploring the provision of a "roving" (satellite) service by a nearby sub-postmaster.

  Penrynside—The sub-postmaster retired from running the post office in July 2000 although he kept the retail shop open, therefore the premises were not available. An option of the provision of a "roving" service by a nearby sub-postmaster is currently being explored.


  Recommendation 11 of the PIU Report stated "The Code of Practice should require the Post Office to consult additional stakeholders in deprived urban areas (such as the proposed Local Strategic Partnerships in England, and corresponding bodies in Scotland, Wales and Northern Ireland) as a condition of closure and relocation of post offices in these areas".

  Accordingly, an agreement has been reached with the Post Office Users National Council (now the Consumer Council for Postal Services) for an appropriate revision to the Code of Practice on closures and relocations. This was agreed before Christmas 2000 in accordance with the PIU timescale, and has been published in bilingual Welsh/English format.

  As well as fulfilling the specific PIU recommendation, the revision also increases the length of time for consultation in the case of a directly operated post office being "converted" to an agent operated post office, and explicitly includes the Post Offices' commitment to do all it can to avoid closures in rural areas.

  These changes have therefore updated the code to take into account the immediate aftermath of the PIU report. However, the Consumer Council and the Post Office both recognise that further review of the Code is sensible in the light of the need for the Post Office Network to adapt to the wider implications of the PIU report and the forthcoming impacts of Benefits work being transacted via Automation Credit Transfer through the banking system. Therefore both parties are further engaged in discussions about changes to the Code. It is anticipated that these discussions will be concluded in the Autumn.


  Plans have been put to Government in response to the Performance and Innovation Unit report into the future of our business and year one of the plans has been agreed.

  The information below falls into three categories—proposals for commercial opportunities, plans for Network Reinvention and plans for increasing confidence in the market place.

4.1  Summary of Commercial Opportunities

  There are three key areas where we said we would develop our new products and services:

  Banking and financial services:

    —  providing an alternative for the banks' customers having to travel long distances to their nearest bank branch;

    —  developing Universal Banking Services to enable those without a traditional bank account to do basic banking transactions and in particular obtain access to benefit payments through their local Post Office outlet; and

    —  providing financial services which also cover a number of other bill payment transactions, including stakeholder pensions and ticketing services.

  Mailing and Home Shopping:

    —  building on traditional mailing services and stamp sales by enabling people to pay for their home shopping purchases and collect them.

  Government General Practitioner:

    —  building on existing work with Government to become the "one stop/first stop shop" for access to, and information about Government departments, local government, and similar official bodies such as the Citizens Advice Bureau, and the Police.

4.1.1  Banking and Financial Services

  Network Banking:

    —  the manual, paper-based service offered at the moment is currently being developed to provide branch networks with a range of transactions from banks and building societies;

    —  a number of banks (Alliance and Leicester, Lloyds TSB, Barclays and the Co-Op, Internet banks Smile and Cahoot) have already been signed up and discussions are underway with other banks and building societies; and

    —  a deal has recently been concluded to enable on line authorisation and we are working to upgrade the Horizon system during 2002. It is believed that this will enable over 200 million transactions a year for the network banking service. The upgrade will also make it much easier to introduce a wide range of new products and services—not just in banking.

  Universal Banking:

  Plans are to set up two new types of accounts nationwide by 2003:

    —  the first centres around basic accounts offered by banks, which provide facilities such as direct debits but exclude overdrafts and other financial services. They will be accessed at Post Office outlets, as well as bank branches and/or ATMs; and

    —  the second is "Post Office Card Accounts" accounts—for those who are not eligible for, or who do not want any type of bank account, and therefore need an alternative to enable them to collect benefits, pensions and allowances. It will be a simple account, accessed using a plastic card, but will not offer overdrafts.

  Smart Cards:

    —  a trial is currently being developed in Manchester with Smart Cards which customers can "charge up" at a Post Office outlet. Journeys on public transport will be debited from the card automatically, without customers needing to pay as they step on, for example, the local bus. The Post Office has "preferred supplier" status as the place to go to recharge cards fro the market leader in this sector; and

    —  an agreement has recently been reached with the SWIFT Consortium in South Wales, made up of six local authorities. The trial, which launched in Caerphilly on 5 March 2001, will provide concessionary travellers with Smart Cards to be used on local transport. The remaining five authorities are planned to go live in April 2002.

  Stakeholder Pension:

    —  from 6 April, Post Office outlets will provide a free first time application checking service and an automated payment service for Standard Life Stakeholder Pensions.


    —  the Post Office's stakeholding in Camelot ensures that we remain the major retail partner for the Lottery. There are exciting ideas for new games to build on successful core business and new terminals will be installed in due course.

4.1.2  Mailing and Home Shopping

    —  the Post Office is presently working with home shopping companies and developing partnerships with major Internet companies like Amazon, to offer collections, returns and a convenient payment point;

    —  the use of Post Office outlets for initial delivery address/alternative deliver addresses is being trialled in 1,000 Post Office outlets, with clients such as the Cotswold Company. One thousand Post office outlets are involved of which 25 per cent were open longer than core hours and five per cent were open on Sunday. Rollout of this service is planned from the middle of 2001; and

    —  opportunities for customers to browse and order goods in Post Office outlets in addition to existing payment and returns services are currently being scoped. Once the collection service is up and running, we would expect to be able to link the services with returns.

4.1.3  Government General Practitioner

    —  a large scale trial in the Leicestershire and Rutland area involving 280 outlets will start in July with the Government investing £25 million in the project;

    —  the service will be trialled with a range of partners for some selected subjects and specific customer groups, in order to provide a taste of what Government GP could offer;

    —  additional training for sub-postmasters and the staff in trial offices will be provided. This will be issues based and will also include new transactions such as the validation and authentication of official forms and registrations;

    —  horizon will be enabled to store and print certain forms and information and provide access to information Government internet sites, ensuring that the offices will be able to give customers a wider range of leaflets and publications;

    —  customers will be able to pre-order forms and pick them up at a later date, with the sub-postmasters helping to identify those who might need specialist forms, assisting in completing them correctly and then forwarding them to the right place;

    —  webphones (a phone with a small screen, and keyboard, enabling access to Internet sites) and kiosks (a computer housed in a box, with a touch sensitive screen and keyboard) will be installed in many offices to enable customers to access the information themselves; and

    —  the idea of "surgeries" is being considered to give customers the option to meet with an expert in a particular issue eg Citizen's Advice Bureau.

4.2  Network Reinvention

    —  It is not expected that any one type of Post Office will be suitable for all parts of the network. This has always been implicitly recognised, but will now be more clearly reflected in the way we work;

    —  There are four main types of outlets—High Street, Neighbourhood, Urban deprived and Rural;

    —  The Network will be split between commercial and social outlets ie those offices expected to run on a purely commercial basis and those for which support will be received through the Government Social Network Payment;

    —  It is recognised that the outlets need to be convenient, not just in terms of where but also how and when customers can use us. A "positive experience" also needs to be offered which means a friendly, personal service in an attractive location, forming part of the community; and

    —  A key element in this will be about enabling people to pay in the way they want. We are therefore aiming to have debit cards accepted across the network before the end of 2001.

4.2.1  Plans for rural outlets

    —  These are defined as outlets in areas of less than 10,000 people, with one or two counter positions and which are likely to have a more limited product range than other parts of the network. However, it is hoped that the availability of some products will be increased as Horizon reduces the costs of extending the product networks; and

    —  Everything possible will be done to prevent avoidable closures of these offices with more creative ways of offering services also being considered, eg extending the use of community offices and partnerships with other people such as pubs, garages, local authorities etc. The option of a sub-postmaster running a number of offices in an area on limited hours in each location will also be considered. There has been a recent announcement of a £2 million Government fund to help in the set up costs of such innovative solutions in individual cases.

Plans for urban deprived outlets

    —  An exact definition of where these areas are has not yet been finalised although the focus will be on the outlets which do not have any other Post Office outlets nearby;

    —  Universal Banking services are likely to be very important in this segment, as are the Government General Practitioner services and the expectation is that more self-service ATMs and/or interactive kiosks will be prevalent;

    —  Work is ongoing with DTI and DETR with the aim of targeting grant support to help offices in Urban Deprived areas and we are looking to provide more assistance particularly on the retail side.

4.2.3  Plans for Neighbourhood outlets

    —  This segment is expected to serve around 65 per cent of the customer base with Multiples forming an important part of this and the majority continuing to be run by individual sub-postmasters. The PIU report saw that there was scope for "bigger, better, brighter" offices in this sector;

    —  The "combistore format"—where the Post Office transactions are handled at the same serving positions as the retail business will be "norm". Results from 12 trial combi-store sites have been extremely positive from both the customer and operators point of view;

    —  There will be an extensive Post Office product range, although this will not include some of the more space hungry offers such as the advice areas etc. More self-service technology to allow customers to find out information and do some basic transactions without the need to a spend time at the counter will also be employed;

    —  Clearer quality terms will be established ie standards for waiting times and other service issues that are expected to be delivered along with longer opening hours in many locations; and

    —  A compensation package for sub-postmasters who do not want to continue to run these types of offices is currently under development.

4.2.4.  Plans for High Street outlets

    —  It is anticipated that these outlets will serve 20-25 per cent of our customer base, but are only likely to include a few hundred of the largest Post Offices. They are "Destination Stores" where people will obtain services they are prepared to travel for and they will offer the full range of services; and

    —  The majority will be either directly managed an downed branch offices or will be run by large multiples.

4.3  Increasing confidence in the market place

    —  A recent agreement abolished the appointment scale—the 25 per cent reduction in the first years remuneration that the Post Office Network has traditionally charged new sub-postmasters taking over offices—from 1 April;

    —  These changes have been communicated to sub-postmasters at conferences throughout January and further communication is planned with potential sub-postmasters, transfer agents and others involved in the sub-post office market to explain our plans and the prospects for the future;

    —  Counters Club will be relaunched from April in partnership with NFSP and Palmer and Harvey. This is a key way in which to help sub-postmasters access the promotions that multiples receive and to enable them to compete more effectively;

    —  Automation is being used to obtain major improvements to our efficiency and accuracy as a business. Horizon, Europe's largest automation project is in the final stages of rollout and as of 9 March, 1,326 Welsh offices have been migrated over to Horizon with the small remainder due to be completed by spring this year; and

    —  Horizon will assist in reducing the paperwork and bureaucracy involved in running post offices by reducing the work involved in the cash account and eventually removing the need for it all together. In addition it will reduce the complexity of transactions, making products more similar to each other so that they are easy to carry out on the counter.


  The Government's decision to pay benefits via bank accounts from 2003 remains a significant threat to the future of the Post Office network and the vital role that it plays in the community. However, to counter this threat the Post Office continues to identify and develop new proposals to replace this business and new ways in which to support local post offices.

Stuart Sweetman BSc FCA

Group Managing Director

12 March 2001

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