Select Committee on Welsh Affairs Appendices to the Minutes of Evidence



Memorandum submitted by the National Federation of SubPostmasters



  The National Federation of SubPostmasters represents the interests of nearly 18,000 subpostmasters 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, subpostmasters.


  The UK's post offices constitute the largest retail network in Europe and offer 170 different postal, government and commercial services. They play particularly important social and economic roles in helping keeping shops in rural and deprived urban areas open. Post offices are frequently the only local place to take out cash, provide support for vulnerable local residents and act as a focal point for communities.

  Although nearly everyone uses a post office from time to time, post offices' most frequent customers are older and poorer people. UK-wide figures show that around 40 per cent of weekly post office customers are over 55 years old and over 60 per cent of weekly customers are from social classes C2DE.1

  At the end of March 2001 there were a total of 1,386 post offices in Wales, these were classified as:




Deprived urban







  Wales has a higher proportion of rural post offices than anywhere else in the UK. Welsh post offices cover bigger geographical areas than post offices in England (an average of 14.8km2 per office). They also serve smaller average populations (2,095 people per office) than all the other countries and regions in the UK. 81 per cent of post office customers in rural Wales, and 91 per cent of customers in urban deprived areas of Wales, visit their local post office at least once a week.2

  Wales has experienced the greatest loss of post offices, between 1995 and 2001, both absolutely and proportionately.3 Over this six year period Wales lost a total of 216 (13.4 per cent) post offices. Welsh post offices may be particularly vulnerable because they tend to support a lower number of customers. Scotland and Northern Ireland, other areas with low numbers of potential customers, have also seen relatively high rates of closure.

  The rate of post office closures is accelerating. During 2000-01 the UK experienced more post office closures than at any other time during the past 20 years—547, or two every working day. Last year Wales lost a higher proportion of its post offices (4.6 per cent) than any other region or country of the UK. Following the UK-wide trend most of these losses were rural offices—61 in total (6 per cent of all rural Welsh offices).

  Post offices close when subpostmasters resign and replacements cannot be found. Research into reasons for resignation suggests that although retirement due to age and ill health are key factors; lack of financial viability and a wish to change career are also very important.4 NFSP believes that in order to obtain a thriving modern post office network, it is essential that post offices are able to provide a viable living for subpostmasters. In order to keep our society's local post office services, the people who run them need to be confident that they will be able to make a decent income.


  There are a number of challenges to our national post office network. From 2003 state pensions and benefits payments will be made electronically by automated credit transfer (ACT). Benefit and pension payments have hitherto made up to 40 per cent of a post office's income. Trends in retailing have resulted in people buying a greater proportion of their shopping at larger supermarkets. This has put pressure on post offices' ancillary businesses. In addition, there has been a general lack of investment in the post office network.

  However, despite these challenges, NFSP believes there are a wide range of opportunities to ensure that post offices have a viable future. In June 2000 the Performance and Innovation Unit (PIU) produced a report outlining Government proposals for the future of the post office network. Out of this came plans to provide a range of banking services from post offices (Universal Banking Services), one stop shop information and advice services (Your Guide) and a reassessment programme to look at the size and shape of the overall network (Network Reinvention). NFSP fully supports the proposals and holds that it is vital that these are successfully implemented in time to arrest the continued erosion of the nation's post offices and ensure a modern vibrant network.

  NFSP is extremely concerned that a further threat to the future of the post office network comes from current Postcomm proposals to open up the postal services sector to competition.


4.1  Universal Banking Services

4.1.1  Features

  From 2003 Universal Banking Services will give the public access to banking facilities through post offices. Universal Banking Services are made up of three elements:

    (i)   The Post Office Card Account (POCA). This will be available for people who are in receipt of state pension, benefit or tax credit. POCAs account holders will be able to pay cash in electronically. Balance enquiries and cash withdrawals will only be able to be made at post offices.

    (ii)   Basic Bank Accounts. These are simple accounts without overdraft facilities, run by high street banks, aimed at people on low incomes, without overdraft facilities. There are some restrictions on eligibility for people with bad credit ratings or records of fraud. Account holders can pay cash in electronically, get cash out only at post offices and ATMs. Accounts allow direct debits, standing orders. Some of the accounts give debit cards.

    (iii)  Current accounts. Universal Banking Services will give customers access to their current accounts through local post offices. At the post office, current account customers will be able to withdraw cash, make a balance enquiry, pay cash or a cheque in.

4.1.2  Support for POCAs

  A MORI survey commissioned by NFSP showed overwhelming support by benefit and pension recipients to continue to receive their payments in cash at the post office.5 Those surveyed in rural areas are more likely to prefer to receive their benefits in cash at the post office than recipients elsewhere. This suggests that Universal Banking Services will play a particularly important role in Wales with its high number of rural post offices. Pension and benefit recipients stated that they prefer to receive their payments via the post office because this gives them instant access to their cash or it is more convenient. Other reasons given for preferring the post office as a means of access cash payments include it being easy to use, easy to travel to and being able to balance money on a weekly basis.

  MORI asked all those who stated they would prefer to receive their benefits in cash at the post office what type of account they would like to have this money paid into. Almost three quarters (73 per cent) say they would prefer to open a new account operated directly by the post office, rather than use a bank or building society account accessible at the post office (23 per cent). The survey also reveals that those from social classes C2DE are more likely to want a post office operated account (78 per cent, compared with 64 per cent ABC1s). People in receipt of Income Support, Job Seeker's Allowance or sickness/disability related benefits are also more likely to say they would prefer an account operated by the post office (84 per cent, compared with 73 per cent overall).

  The evidence from the MORI survey suggests that the Post Office Card Accounts (POCA) will be the preferred method of accessing benefits and pensions amongst recipients. This is likely to be particularly popular with people on lower incomes and people with disabilities. Since Wales has a high proportion of people who are economically inactive (26 per cent of people of working age) and of people with a limiting long-term illness or disability (16 per cent, and 30 per cent in some small areas), POCAs will be especially important in Wales.6

4.1.3  Issues

  NFSP is concerned to ensure that anyone in receipt of a state pension or benefit who wants a Post Office account will be able to have one, and that the Government meets the cost of providing these accounts. The Government has stated that it has a working assumption of three million POCAs. However, NFSP is concerned about what will happen if more than 3 million people want POCAs, and believes that the Government needs to commit to pay for these extra accounts if they are needed.

  Although people may chose basic bank accounts (BBAs) over Post Office Card Accounts because BBAs offer direct debits; it is worth noting that the banks are charging people for failed direct debits on BBAs—up to 25 per day.7 This could be disastrous for people on low incomes, the very people BBAs are aimed at: a particular concern in Wales where 1997 figures show around half of all households as having an annual income of less than 10,000.8 It is also worth noting that many basic bank accounts exclude people with poor credit histories—including people with county court judgements and people with bankruptcy orders. This may mean that up to five or six million people cannot have BBAs.

  NFSP holds that it is crucial that pension and benefit recipients get to use the account they want for receiving their payments. Marketing and information around the switch to electronic payment of benefits must reflect a genuine choice for claimants and pensioners. Recent information from the Department for Work and Pensions suggests that people will be actively discouraged from opening Post Office Card Accounts. This clearly removes genuine choice. NFSP is concerned that this also undermines the role of post offices, for customers with basic bank accounts or using current accounts will be the banks' customers, not post office customers.

4.2  Your Guide

  Your Guide (previously known as Government General Practitioner) is the proposed one stop shop information and advice service available in post offices. It is designed to help post office customers in their dealings with local authorities, public bodies and the voluntary sector. By dealing with simple inquiries and transactions it is viewed as complementing the work of the experts in Government, the public and voluntary sectors.

4.2.1  Support for Your Guide

  The interim report on the Your Guide pilot, which ended in March 2001, found Your Guide to be very popular with customers and able to improve the viability of post offices.9

  The pilot, aimed at people over 55, parents and job seekers, ran for six months in 269 post offices in Leicestershire and Rutland. It offered information about benefits, retirement, jobs, training and local services and facilities. The information was mainly provided over the counter, in leaflets and via touch screens. There were also freephones and, in some of the larger post offices, expert advice sessions.

  Researchers found that post offices are seen as the most attractive single location for access to a range of government services by all of the main target audiences for Your Guide (an average of 61 per cent, compared with 26 per cent for libraries and 10 per cent for local councils). Overall satisfaction for users of Your Guide was high at 89 per cent. Users particularly valued Your Guide for the convenience of having services all in one place. Other benefits mentioned were that the services were free, easy to use, had a local focus, gave access to technology, could be used anonymously and were empowering. The fact that the information provided included data from both national and local sources and the public and private sectors was especially valued.

  Users of the expert advice centres and touch screens were found to be particularly satisfied with the service they received. The expert advice services were stated to be valued for providing services in the familiar, convenient and non-stigmatising environment of the post office. The touch screen system was particularly successful on the subjects with the most dynamic content—including information on paid jobs, benefits and entitlements. Research shows that 35 per cent of touch screen users did not have access to the internet. 31 per cent of users who provided feedback stated that they had never used a computer before, a high number of users were C2DEs (72 per cent). This indicates that Your Guide can provide access and encourage usage by groups normally excluded from the benefits of technology.

  The interim report indicates the positive role Your Guide can play for central and local government stakeholders. The report suggests that the Your Guide counter assistance service checking the completeness of forms can significantly reduce the error rate in central and local government forms. Similarly, the Your Guide integration of personal guidance, touch screen information and a freephone reduces the number of misdirected calls that local and central government call centre based services normally receive. Your Guide also helps government bodies to raise public awareness of services and products. Qualitative and anecdotal evidence regarding the effectiveness of Your Guide to do this is positive.

  Clearly in addition to the individual services Your Guide offers customers, its potential to provide much needed financial support to local post offices is critical. There are a number of routes by which this could occur including payments by Government bodies for the provision of information or services through Your Guide; payments to local post offices by individuals or small businesses wishing to access information or services or place adverts and notices on the Your Guide services; payments by commercial organisations wishing to publicise their services or products through Your Guide. It is also likely to result in a wider customer base through new customers being attracted to post offices to use Your Guide and a positive impact on the image of post offices.

  NFSP believes that Your Guide could make a particular contribution in Wales with its high proportion of rural post offices. The pilot proved to be especially popular in rural areas, here the use of all components of the service was at least twice as great as might have been predicted based on the usage of traditional post office services.

  Subpostmasters are concerned that there is a viable future for their businesses. NFSP holds that Your Guide presents a major plank in ensuring a thriving post office network. Given the current major threats to the network, it is important post offices can provide new modern services that customers want. The evidence shows Your Guide not only to be very popular with its users but also that it promotes social inclusivity and access to services. NFSP holds that Your Guide should be rolled out on a UK-wide basis. Since so many post offices are operating on marginal incomes and under threat of closure, new sources of income are need now. It is clearly important that a national Your Guide service is set up as quickly as possible in order to provide subpostmasters with this much needed income. It is also crucial that the Government ensures the service is properly funded. The Government has a key part to play in ensuring that its own departments deliver services through Your Guide. The interim report on the pilot indicates that not only will this increase the viability of local post offices but it will also increase government efficiencies.

4.3  Size and shape of post office network

  The "network reinvention" programme involves looking the size and shape of the national network of post offices. In order to arrest the unmanaged decline of the local post office network—the network is to be reinvented, with the creation of bigger, brighter, better post offices. This will include merging post offices where there is duplication of services; looking at the number of post offices required; optimising the locations of post offices; funding to help post offices improve their physical appearance and accessibility; funding to support post offices which may not be viable in strictly commercial terms, but have an important social role ("rural" and "urban deprived" post offices).

4.3.1  Rural post offices

  Recent evidence published by Postcomm, based on detailed research by Environmental Resources Management and MORI highlights the crucial role post offices play in rural areas, particularly for the more socially excluded members of society. 10

  Interestingly, researchers found that rural post offices in Wales are more highly valued by their customers than those in England and Scotland, with 82 per cent of Welsh rural customers strongly agreeing on the importance of the services provided by the post office. Highest levels of agreement of the value of the post office to the local community are among the over 65s, those without a car, those with a disability, one parent families and carers. Those making greatest use of rural post offices to obtain cash are over 65 (51 per cent), unemployed (50 per cent), people with disabilities (43 per cent), carers, one parent families and people with no car. 80 per cent of rural customers aged over 65 think of the post office as a meeting place. Use of shops attached to post offices was found to be particularly high in Wales—63 per cent of customers using the post office at least once a week. Village shops are seen as important in giving access to food. 54 per cent of rural customers in Wales use the attached shop for groceries (this compares with only 15 per cent in England).

  The Government stated in the Performance and Innovation Unit report that avoidable closures of rural post offices should be prevented, this holds initially until 2006. However, rural post offices are closing now. Government funding has been earmarked to support rural post offices from 2003, but this is needed immediately.

  Not only is this money needed to save rural post offices, but funding for the rural network will also help urban post offices. Currently there is a cross-subsidy from urban post offices to rural post offices. Funding to support rural post offices will mean this cross-subsidy can cease and urban subpostmasters will have more resources to improve their own offices.

  The Government is considering a Postcomm report on the best way to channel financial assistance to rural post offices. NFSP is keen to press the urgency of allocating this fund. However, it is not known what stage the considerations are at, how much money is being recommended and when the money will be available. Given the 70 per cent of Welsh post offices based in rural areas this is a particularly pressing issue for Wales. Subpostmasters need to be assured that they have a future that is financially viable.

4.3.2  Urban deprived post offices

  18 per cent of all urban Welsh post offices are based in deprived areas. 11 Recent research shows that urban deprived post offices are rated as most important by older people, disabled people, those without a car and people who find it difficult to access public transport. 61 per cent of urban deprived customers say they use their local post office to access free community services, including meeting friends, seeking informal advice from subpostmasters, reading community notices and obtaining government information. In urban deprived areas, post offices are the main source of cash. Researchers found that 55 per cent of urban deprived customers in Wales obtain cash through pensions or benefits at the post office. 12

  The Government is making 15 million over three years for post offices in England under a fund administered by DTLR. NFSP is concerned that there have been delays in developing this fund. It is important for subpostmasters with urban deprived offices to know when the money will be available and how it will be apportioned.

4.3.3  Urban commercial post offices

  25 per cent of Welsh post offices fall into the category of urban commercial post offices. Population shifts and changes in shopping patterns mean that some of these post offices are struggling and on the edge of viability because their customers have gone

  NFSP supports the programme of change for urban post offices which will result in slightly fewer urban post offices overall. However, it will enable resources to be channelled more effectively to provide viable up to date urban offices.

  The programme will involve modelling to identify neighbourhood retail hotspots; taking into account subpostmasters preferences regarding their post offices; consultation with the consumer watchdog (Postwatch) and NFSP. There will be mergers of some post offices and subpostmasters who leave under the programme will be compensated for loss of asset.

  The programme will start when Government funding is secure. Firstly, the European Union has to decide whether the funding is classified as state aid, then it will be subject to parliamentary debate. NFSP believes that it is important that this programme starts as soon as possible, since subpostmasters are very worried about uncertainties over the future.


  The National Federation of SubPostmasters is concerned about the effects of Postcomm's current proposals for liberalising the postal services. These proposals are likely to result in a loss in revenue for Consignia, which will lead to a reduction of funding available to support post offices, since one of the main sources of Post Office Ltd (part of Consignia) is payments to subpostmasters.

  Postcomm's plans incorporate a first phase of market opening lasting from April/May 2002 to March 2004. During this phase licences will be available for operators wishing to provide large mailings of 4,000 or more items. "Consolidation" licences will be available for operators to collect and sort mail which will then be passed to Consignia for delivery. "Defined activity" licences will allow for alternative local delivery services and mail services for closed user groups. From April 2004 Postcomm proposes to lower the large mailings threshold. By March 2006 at the latest, Postcomm proposes to remove all restrictions of market entry and deregulate wherever possible.

5.1  Undermining Consignia's revenues

5.1.1  Cherry picking

  It is widely accepted by a wide range of organisations from Consignia themselves to the National Audit Office that some parts of Consignia's services are more profitable than other parts. For example, more revenues are accrued from providing postal services to businesses and many urban areas than services for remote rural customers. In fact, profits made from the more lucrative services subsidise the less profitable services.

  NFSP believes that Postcomm's proposals will open up the postal services sector in such a way that competitors are allowed to concentrate their activities on the markets with low operating costs. This is exactly what has happened with the interim licences Postcomm has already granted. This seriously undermines Consignia's revenues since competitors will take the profits that are now used to subsidise the more expensive parts of the service. Yet the universal service obligation will still require Consignia to continue to provide a service to all customers. Consignia affirms that this form of "cherry picking" competition is a particular threat as Consignia depends on a few very large and increasingly powerful customers for a major part of its revenue.

5.1.2  Consolidation

  In the first phase of opening up the postal services network to further competition, Postcomm proposes to issue consolidation licences. These licences would give third parties access to parts of the postal network currently operated by Consignia, to collect and sort mail. NFSP is concerned that such licences will cause logistical problems and undermine the revenues of Consignia, thereby further threatening the universal service.

  Due to its universal service responsibilities Consignia would have to maintain a costly excess capacity in order to guarantee service in the event of its competitors withdrawing. This is likely to place it at a competitive disadvantage, resulting in a loss of business.

  Consignia also states that third party access to postal networks entails substantial practical difficulties, which would be exacerbated as sorting processes become increasingly automated. 13

5.1.3  Economies of scale

  A recent National Audit Office report suggests that competitive entry into the postal services sector could cause Consignia's level of activity to fall and its unit costs to increase. 14 In other words, it costs less per item to process large amounts of mail than it does to process small amounts of mail. Losses in economies of scale are therefore likely to lead to a further loss of revenue for Consignia.

5.1.4  Cash handling and distribution

  Currently Consignia's cash handling and distribution department collects money that has been deposited in post offices by local businesses. Further loss of Consignia's revenue due to profits being taken by competing companies could well result in Consignia, under pressure to reduce costs, outsourcing their cash handling and distribution function to a competitor. This may result in businesses no longer depositing their cash in the local post office, since the money would be collected by other companies. Again this would result in a loss of business for many sub post offices.

5.2  Alternative posting facilities

  Apart from threats to the national post office network through a general reduction in revenue for Consignia, a more specific threat arises from alternative posting facilities set up by rival companies. This seems a likely result of Postcomm's proposals to fully open the postal market to competition. For example, as is pointed out by the Co-operative, under the headline "Post Office break-up could be a real opportunity", the Co-operative Group has a ready made network of collection and drop-off points that could provide alternative outlets for the distribution systems of competing mail companies. 15

  The provision of alternative posting facilities would clearly affect local post offices negatively. A resulting reduction in transactions and numbers of customers coming into post offices and spending money in attached shops would impact badly on the many sub post offices already operating on very low margins.

  Postcomm's proposals do not provide—like the European Commission's proposals—for a review with the possibility of postponement of full liberalisation but they provide for consideration of whether the end date for full market opening should be brought forward.

  Postcomm's proposals appear to ignore warnings in the report of the National Audit Office which says: "The introduction of competition could result in a breakdown in the delivery of a universal service at a reasonable uniform price."

  The Federation is concerned that these proposals are not designed to help Consignia whatever their problems are and we are far from convinced that the general public will benefit. The position of Wales with its higher proportional rural Post Offices is even more vulnerable than the remainder of the UK which at this time could be described as precarious.


  The National Federation of SubPostmasters believes there are two main threats to the future of our national post office network. Firstly that the conclusions of the Performance and Innovation Unit report, Counter Revolution, are not implemented fully, properly funded or in time to save the many post offices that are at risk of closure. Secondly, that current Postcomm proposals for opening up the postal services sector to further competition will threaten the post office network through undermining Consignia's revenues and the establishment of alternative posting facilities.

  Uncertainties regarding the logistics, timetables and funding for the PIU proposals leave subpostmasters unsure of whether their post offices are likely to generate them a living in the future. Similarly, subpostmasters are concerned about the outcomes of liberalisation and how this will affect their business. Insecurities amongst the people who actually run our local post offices lead to resignations and a lack of new people willing to take on the running of a post office. Post offices are closing now, and over the last few years Wales has experienced a greater number of closures than anywhere else. Continued uncertainties can only lead to more post office closures.

  Post office closures hit the more 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 office services more than others, but it is these groups who will find it most difficult to travel further afield to access the services that a closed post office formerly provided.


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

  2  Postcomm, July 2001, Post Offices, Customers and Communities.

  3  Postcomm, September 2001, Post Offices and Community Needs in Rural and Deprived Urban Areas.

  4  Postcomm, July 2001, Post Offices, Customers and Communities.

  5  MORI, March 2001, Survey of Pension and Benefit Recipients.

  6  National Assembly for Wales, figures for 1997-8 and 1991 respectively.

  7  Financial Services Authority, August 2001, No Bank Account? Why it could pay you to have one (leaflet).

  8  National Assembly for Wales.

  9  Post Office Ltd, January 2002, Your Guide Programme—Interim Evaluation Report.

  10  Postcomm, December 2001, Serving the Community I—evidence of the community value of post offices in rural areas.

  11  Postcomm, July 2001, Post Offices, Customers and Communities.

  12  Postcomm, December 2001, Serving the Community II—evidence of the community value of post offices in urban deprived areas.

  13  Consignia, September 2001, Response to Promoting Effective Competition in UK Postal Services.

  14  National Audit Office, January 2002, Opening the Post.

  15  Co-operative News, February 2002.

National Federation of SubPostmasters

April 2002


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