Select Committee on Welsh Affairs Appendices to the Minutes of Evidence


Memorandum submitted by the National Federation of Sub-Postmasters


  The National Federation of Sub-Postmasters represents nearly 18,000 sub-postmasters throughout the United Kingdom. Sub-post offices make up 97 per cent of the national network of post offices and are run by private business people, sub-postmasters, most of whom run their post office business alongside another retail business.


  The UK-wide network of local post offices is the largest retail network of its kind in Europe. It reaches into every urban community and nearly every sizeable rural settlement, with 94 per cent of people in the UK living within one mile of a post office. Twenty eight million customers make 45 million visits to post offices every week. Post offices offer a range of 170 different services and products including banking services, cash management for businesses, bill payment, pension and other benefit payments, insurance services, car tax and TV licences, mail and distribution, passport renewal applications.

  Much recent evidence has highlighted the crucial social and economic roles local post offices play in their communities. Not only do post offices provide a wide range of postal, government and commercial services, but often their very existence helps keep open retail outlets in rural and deprived urban areas. Commonly the shop attached to a post office is the last remaining shop in the village. Post offices, frequently the only local place to take out cash, make a special contribution to local economies. People able to access cash often spend it in other local businesses. Post offices provide access to cash for local businesses themselves.

  Sub-postmasters and post offices also play an invaluable role in many communities by providing support for vulnerable residents, including older and disabled people. For example, sub-postmasters frequently interpret official letters, field lost property, take messages and offer emotional support.

  Post offices act as a focal point for communities, they give people a place to congregate and are used by the police, local authorities and tourist attractions to display information.


  Despite the vital social and economic role played by local post offices, over recent years post office closures have been escalating. Throughout most of the 1990s approximately 200 UK post offices per year have closed. In 1999-00 there were 380 closures. The first nine months alone of 2000-01 saw 434 closures. Closures in Wales closely mirror the national picture. In March 1999 there were 1,501 Welsh post offices, in March 2000 1,459 and in December 2000 1,409 post offices.

  The most common reason for post office closure is the resignation of the incumbent sub-postmaster and the inability to find a replacement.

  Sub-postmasters resign for a wide range of reasons, often their age is a key factor. Low or declining financial return from the whole outlet is also a frequent reason for resignation. This is in part due to trends in retailing, including the increasing dominance of supermarkets and the desire by consumers for a wider range and quality of goods. Increasing levels of car ownership, levels of commuting and the general decline of local services are further factors.

  Post Office research suggests that the resignations are most likely to be due to a combination of factors1. These may also include a lack of support, advice and good training from the Post Office for sub-postmasters, lack of understanding about what the role involved before taking on a post office, concerns about criminal incidents and personal safety. Other issues leading to dissatisfaction with working conditions include the problems many sub-postmasters experience in taking adequate holiday and covering for short term ill health. A small number of sub-postmasters resign because they feel unable to cope with major changes within the post office, such as the introduction of the Horizon computer system.

  When a sub-postmaster resigns, the Post Office looks for a replacement. There is a range of reasons for not being able to find a replacement. It may be simply that no-one is willing to take on the role due to uncertain financial prospects. Changing rural demographics and lifestyles mean that there is a smaller pool of people prepared to take on small rural sub-post offices. In some cases there may no longer be any suitable premises available—the old premises having been converted to residential use, often a financially astute move due to high property prices.


  The closure of a local post office clearly results in making access to post office services more difficult. It may result in the closure of the last remaining shop in the community, particularly in rural areas. It is also liable to have a wider economic impact on the local community.

  A recent Countryside Agency report on rural post offices suggests that if a local post office closed, the time taken for a customer to travel to the nearest post office would more than double and monthly travel costs would increase by an average of £1.35 per user. Moreover, the closure of a post office in a typical settlement of 500-1,000 people is likely to impose an economic resource cut of over £52,000 per annum to the local community. 2

  The people liable to be worst affected by the effects of post office closures are those who are already vulnerable to social and financial exclusion, including older people, disabled people and people on low incomes. This is a particular problem in Wales which has a high proportion of people over state retirement age (20 per cent), a large number of whom live on the basic state pension. There is estimated to be nearly half a million people in Wales with a disability. Wales also has a higher level of unemployment than the UK as a whole (7.3 per cent, compared with 5.9 per cent UK-wide, 1999). In addition, low pay is a major problem in Wales with earnings lower for Welsh people, compared with British workers in general. 3

  The Financial Services Authority reports that financial exclusion is higher in Wales than in England. 4 One of the major aspects of financial exclusion relates to geographical access to services and over the past decade there has been a considerable reduction in financial retail outlets in poorer communities. Research suggests the pattern of bank and building society branch closures has focused on areas populated by people on low income. 5 This problem has been exacerbated by low levels of car ownership among people living in poorer communities and the subsequent need to rely on expensive and often unreliable public transport. It is also clearly more of a problem for those with mobility problems, including older and disabled people.

  As the Financial Services Authority points out, financial exclusion frequently reinforces other aspects of social exclusion including lack of employment opportunities, lack of access to services and a poor environment. The continuing closure of local post offices cannot but worsen this situation, ultimately resulting in increasing social isolation and all the problems that brings to individuals, communities and society in general.


  It is widely accepted that the post office network urgently needs to develop, modernise and adapt to the changing social and economic environment in which it operates.

  One of the largest sources of business for post offices is the payment of social security benefits. The Government has announced that from 2003, order books and girocheques will be discontinued and benefits will be paid to claimants by an electronic system. Alongside issues of technological development, changing preferences and lifestyles amongst consumers, this change in the method of benefits payments clearly poses a major challenge to traditional post office business.

  In June 2000, the Government's Performance and Innovation Unit produced a report, Counter Revolution, which outlined plans for the future of the post office network. 6 The report stated that the Post Office needs to maintain a network offering people in all parts of the country access to post offices. Rural and urban post offices should modernise and there should be no further avoidable closures of rural post offices.

  The report also proposed new lines of business for post offices. A Universal Bank, specialising in providing banking services to people outside the banking mainstream, should be set up by the Post Office in partnership with high street banks. The Government stated that the Universal Bank is the best means to ensure that benefit recipients can continue to access their entitlements in cash at post offices. Additionally, post offices should develop a role as Government General Practitioners, providing information on government issues and helping citizens carry out routine transactions with government bodies. There is also a role for post offices to provide Internet learning and access points for the public.


5.1  Government proposals

  The National Federation of Sub-Postmasters (NFSP) fully supports the Government's proposals as set out in, Counter Revolution, NFSP regards their implementation as essential to arresting the erosion of the post office network. Despite these laudable plans, as the figures show, post office closures are on the increase. This suggests a degree of urgency over their implementation; and a need for good communication and clarity over future plans for their implementation. As the Performance and Innovation Unit (PIU) points out, closed post offices rarely re-open, and re-opening becomes less and less feasible as time goes on.

5.1.2  Maintaining the network

  The PIU report states the Government should provide financial assistance, if necessary, to protect rural post offices from 2003 to 2006 (conclusion 5). This money is essential. However, it is needed now. Without immediate financial assistance, many more post offices in Wales and throughout the UK will have closed before 2003. Urban post offices also need to be modernised (conclusion 7, PIU report). Currently the network of rural post offices is cross-subsidised by the profit-making urban post offices. Urban post offices cannot undergo the crucial transformation into vibrant modern establishments if their resources continue to be drained by the necessity of supporting the rural network. The immediate provision of Government financial assistance for rural offices would greatly alleviate the need for this cross-subsidisation.

  The PIU report also states that a fund should be established to help sustain and improve post offices in deprived urban areas (conclusion 10). Although closures have tended to affect rural areas, urban post offices are increasingly under threat, particularly in deprived urban areas. NFSP holds that in order to stop the closure of post offices in deprived urban areas, government money for these offices is also needed immediately. The Financial Services Authority report on financial exclusion points out "financial desertification" due to bank and building society closures, has been spatially uneven and focused on the deprived urban areas. This suggests the need to retain post offices in these areas is particularly important.

  NFSP is concerned that the Government should provide a clear message indicating exactly what these funds are, and will be for. This would help to reassure many thousands of sub-postmasters who are extremely anxious about their future livelihoods. It would also assist organisations working in the postal services sector, including the National Federation of Sub-Postmasters, with forward planning.

  It is important that NFSP is centrally involved in advising the Government on the best way to channel financial assistance to post offices (conclusion 6, PIU report). Currently NFSP works with the Post Office to make decisions on compensation from the discretionary fund for post office closures. The same mechanism is used to dispense from the ISIS (improvement in security in sub-post offices) and Horizon (IT system) modification funds. NFSP would support using these models as the basis for channelling these Government funds to individual post offices.

5.1.3  New lines of business for post offices

  The Performance and Innovation Unit report, Counter Revolution, sets out plans for developing new roles and functions for the national network of post offices. These are crucial as they will generate income for post offices and ensure that local post offices provide modern services to meet the needs of their users.

  (i)  Universal Bank

  Central to the plans is the proposal for Universal Banking Services. Negotiations between Government and stakeholders over Universal Banking Services have been long and protracted. However, Stephen Byers, Secretary of State for Trade and Industry, has clearly committed to the Universal Bank as "post office based". NFSP believes that in order to ensure a viable future for the post office network, it is vital that post offices operate at the core of the Universal Bank. Universal Banking Services are envisaged to consist of three tiers—firstly, a "Card" or "Clear" account that is a direct replacement for the order book, this enables electronic transfer of benefits/pensions, but is as simple as an order book to operate. The second tier, a "social exclusion account" or "basic bank account", can be opened at a post office and accessed through the post office or an ATM. The third tier is the use of a customer's existing bank account, which will be accessible at post offices.

  NFSP's view is that the "Card" or "Clear" account represents the Government's commitment to a post office based solution. It is important that these accounts are not capped, numerically or financially. Anyone in receipt of state benefits or pensions should be eligible. This will meet the Government assurances that people who wish to continue to collect their cash in post offices will still be able to do so, before and after the changes to the methods of benefits payments in 2003. Research published by the Financial Services Authority suggests that up to 9 per cent of households to not have a bank or building society account of any type and up to 20 per cent of households lack a current account. 7 Many people say that they prefer a cash budget as they feel it gives them more control over their finances.

  NFSP is concerned that the second tier of banking services, the "basic bank accounts" would not, if regarded as the main replacement to the order book, bring sufficient income into post offices. Basic bank accounts are not restricted to benefit recipients and should be available for anyone. However, evidence suggests basic bank accounts are unlikely to meet the needs of a large number of people who are in receipt of pensions and benefits. Basic bank accounts have been set up by the high street banks, but, as the National Association of Citizens Advice Bureaux points out, many of the accounts on offer are not very basic and exclude people with poor credit histories. 8 For instance, many accounts exclude people with county court judgements. 9 County court judgements tend to last for six years and in the year 2000 alone, 1.3 million county court judgements were made in England and Wales. This suggests it is possible that the total number of people unable to access many of the basic bank accounts, due to a county court judgement, could be anything up to five or six million. Other accounts exclude people with bankruptcy orders. Bankruptcy lasts for three years and during the three year period 1997-1999, there were over 60,000 bankruptcies.

  (ii)  Government General Practitioner role

  Proposals for offering information and signposting around government services, the Government General Practitioner (GGP) role for sub-postmasters, are a further crucial development for local post offices. This role will be piloted in post offices in Leicestershire during 2001. The GGP role dovetails well with other Government proposals such as the Community Legal Service whose aim is to provide a network of information, advice and legal services for local communities. GGPs could work within this network as quality marked providers of information services.

  NFSP is concerned that for this role to be a success, sub-postmasters must be properly trained, accredited and remunerated for this function.

5.2  General government support

  Local and central government also have a more general role in giving post offices more business. For instance, NFSP advocates payments for local government services to be made through post offices. Central government departments should be directed to consider post offices first when reviewing the provision of their services at a local level. Clearly the GGP role gives a good structure for introducing further government service functions into the post office.

  The extension of mandatory business rates relief to 100 per cent for all post offices would be an additional assistance.

5.3  Other issues

  There is a range of further issues that need to be addressed in order to provide better support to sub-postmasters and stop the continued erosion of the post office network.

  (i)  Greater financial return for sub-postmasters

  The most significant problem facing sub-postmasters in the operation of their businesses is low financial return. NFSP is concerned that the Post Office does not pass on sufficient revenue from clients to sub-postmasters and believes that the Post Office should ensure sub-postmasters receive a greater return from their transactions. To assist in the assessment of reasonable rates of return for sub-postmasters, more openness regarding Post Office/client payments is required.

  (ii)  Publicity for post office services

  It is important that the Post Office carries out more advertising and publicity work. Responses to the Postal Services Commission's discussion paper on preserving access to post offices in rural areas indicate that customers do not know about all of the 170 services available at post offices. 10

  (iii)  Training for sub-postmasters and their staff

  Post Office research identifies inadequacies in the training provided for sub-postmasters as a major concern. 11 The main problem with current training is that sub-postmasters are merely given written material to read in their own time and are expected to train staff on the job. NFSP holds that training is crucial to the provision of a good service. Sub-postmasters should be trained more actively by the Post Office, and then in turn should train their staff.

  Staff training should be given at a specific time and the sub-postmaster should be paid for this. To assist the sub-postmaster with his own training duties, some help with training skills needs to be provided. Since sub-postmasters are private business people it is especially important that, if they have to leave their offices to attend training sessions, they are paid directly or receive accreditation for their training that results in greater remuneration.

  (iv)  Support for the retail side of the business

  Sub-postmasters need business advice and support. Years of lack of investment in post offices have used up the takings on the private side of the businesses, resulting in an urgent need to regenerate both sides of the business.

  Support is needed over the sourcing of retail products. This is something that NFSP is currently working on by developing an affinity group wherein NFSP sources goods which can be bought at a discounted rate by sub-postmasters.

  NFSP is also looking at developing a symbol group—branded core products, such as stationery, for sub-postmasters to sell.

  A further need is for independent business advice specifically geared towards sub-postmasters. This could cover a whole range of issues from finance and accounting to staff management and marketing. Such a service could be set up and run by NFSP in partnership with funders and parties with shop business expertise.

  The government needs to take a greater interest in the private side of the sub-postmaster's business if we are to have the viable and vibrant post office network. Competition from supermarkets is intense and if local independent shops are to survive, government support is essential.

  (v)  Provision of relief sub-postmasters

  Businesses running with tight margins that are forced to close due to short term problems—such as short term ill health or other personal reasons—are likely to run into major financial difficulties. A solution to this problem for sub-post offices is to set up an efficient system of relief sub-postmasters. This is a practice used by many other trades and professions—for instance the pub trade, general practitioners, the teaching profession.

  A relief pool of sub-postmasters would also help with the problem of holiday arrangements. Many sub-postmasters cannot currently take adequate holiday since they have to organise getting their own substitute and yet there is no centralised system of providing locum sub-postmasters. Moreover, although the Post Office currently provides a holiday substitution allowance to pay for reliefs, the payments do not cover the actual cost of employing the relief.

  (vi)  Security for sub-postmasters

  The Post Office needs to work further on making sub-postmasters feel more physically secure and also to protect them from criminal incidents. NFSP suggests that sub-postmasters should be provided with training on how to deal with people who are behaving aggressively or violently.

  To increase current levels of physical security, telecash dispensers could be installed in post offices, these are thought to be more secure than safes. Research should also be undertaken regarding alternative alarm systems. The current arrangement of audible (rather than central station monitored) alarms puts the onus on sub-postmasters, rather than the police, to attend if the alarm sounds out of hours. This is an unsatisfactory arrangement as it puts sub-postmasters at physical risk and is clearly a great source of anxiety.

  There is also evidence that sub-postmasters who have suffered from crime feel very unsupported. NFSP suggests that there should be research into establishing a formal scheme offering support to sub-postmasters in this situation.


  Post office closures hit socially excluded members of society most, and in Wales there are high proportions of older people, people who are unemployed or on low incomes and disabled people. Not only is it older and poorer people who tend to use post offices more than others, but it is these groups who will find it most difficult to travel further afield to access the postal, financial and retail services that a closed post office formerly provided.

  The implementation of Government proposals, as set out in the PIU report Counter Revolution, is crucial to the survival of the post office network. A post office based Universal Bank must be introduced to replace the order book for payments of pensions and benefits. The GGP role for sub-postmasters must be properly developed and funded. Government money specifically for supporting rural and urban deprived post offices needs to be adequate, well-distributed and forthcoming now.

  Other measures ensuring better working conditions and a greater financial return for sub-postmasters also need to be implemented in order to ensure that running a sub-post office is a viable and financially adequate career choice.

  Without these essential developments, post offices will continue to close and the most vulnerable people in our society will be subject to even further social exclusion.


  1.  Post Office, April 2000, MSS Marketing Research Project MR3806.

  2.  Countryside Agency, July 2000, The Economic Significance of Post Offices in Rural Areas.

  3.  Welsh Affairs Committee, November 2000, Social Exclusion in Wales.

  4.  Financial Services Authority, July 2000, In or Out?—Financial Exclusion: a literature and research review.

  5.  Financial Services Authority, July 2000, In or Out?—Financial Exclusion: a literature and research review.

  6.  Performance and Innovation Unit, June 2000, Counter Revolution—Modernising the Post Office Network.

  7.  Financial Services Authority, July 2000, In or Out?—Financial Exclusion: a literature and research review.

  8.  National Association of Citizens Advice Bureaux, January 2001, Access to Basic Bank Accounts.

  9.  The British Bankers Association website,, gives details of basic bank accounts provided by their members.

  10.  Postal Services Commission, December 2000, Preserving Access to Rural Post Offices.

  11.  Post Office, April 2000, MSS Marketing Research Project MR3806.

National Federation of Sub-Postmasters

March 2001

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