Annex A - The development of the post
"'Unhappy is the village without
a post office"
1. There are three key themes in the development
of the post office network. The first is that until quite recently,
it lacked a separate history post offices were an inextricable
part of the entity now known as Royal Mail. The second is that
from the start, post offices were a mixture of public and private
enterprises, with the private predominating. The third is that
their growth and development have always been a matter of opportunism:
there has never been any grand plan or overarching principle.
All three themes are highly relevant to any consideration of the
future of the network.
2. Historians generally take the starting date of
both the state postal and post office services as being 1635.
In that year, under a Royal Proclamation from Charles I, the royal
domestic mail services were made available for public use, in
order to raise revenue for the King. In October that year, Thomas
Witherings opened the first post office, in Bishopsgate Street
in London, to which the public could take mail for posting and
collect mail sent to them. A struggle for control of this monopoly
service led to the Post Office Acts of 1657 and 1660. The latter
set out the duties and remuneration of postmasters throughout
England and Scotland.
3. At this time, and for long afterwards, post offices
were mainly based in coaching inns.
Part of the duty of the postmasters/innkeepers, alongside collecting
mail from the public, was to provide fresh horses for the riders
transporting the mail. Postmaster remuneration was dependent on
the volume of mail handled, and the system was administered from
a central office in Lombard Street, London.
4. Post offices began offering financial services
more than two centuries ago: in 1792 a money order service was
introduced. This allowed an order to be purchased from one office
and sent to the recipient, who could then exchange it for cash
at another post office. This was one of many developments which
led to the growth of the network up to the First World War. Others
- The introduction of the uniform
penny postage in 1840. This greatly increased the volume of mail
posted and the demand for post offices.
- The introduction of the Post Office Savings Bank
in 1861. The Post Office Savings Bank Act empowered the Postmaster
General - the Minister responsible for mail services and post
offices - to receive money on deposit, make repayments and pay
annual interest of 2.5 per cent on depositors' balances. At that
time there were few banks outside major towns; by 1863, 2,500
post offices were offering the service.
- The coming of the telegraph - and the monopoly
of running the service given to the General Post Office (GPO)
- The introduction of the parcel post service in
- The introduction of Old Age Pensions in 1909,
payable at post offices.
5. Until 1854, although mail and post office services
were a government monopoly administered by a government department,
all post offices throughout the country were private businesses.
In that year, the first post offices operated by the GPO were
opened, staffed by GPO employees and known as crown offices. But
privately run post offices (sub-post offices) were and remained
a large majority. Subpostmasters - mainly owners of small shops
- 'were attracted not so much by the generosity of the payments
as by the "ulterior consideration" of attracting customers'.
The total network grew from 9,973 offices in 1854 to 24,354 in
1913 - of which 23,326 were sub-post offices.
The total number of offices remained surprisingly constant for
the next 65 years.
6. It was in the late nineteenth and early twentieth
centuries that post offices came to be regarded as central to
the life of a community: "If the place be a place at all,
there we shall find a Post-office".
The fact that post offices were, in effect, providers of universal
government services, but were mainly themselves small businesses
was considered one of their strengths: "The sub-postmaster[
as it were, a foot in both worlds, the commercial and the official,
and he comes to his duties with the training not of a civil servant
but of the local tradesman[
][Such people] are in close touch
with the public, they know its peculiarities across the counter,
and they are less likely to be strangled by red tape".
7. Meanwhile, the range of financial services offered
by post offices continued to grow: government stocks and bonds
in 1880; insurance and annuities in 1888; and war savings certificates
(later renamed National Savings Certificates) in 1916. During
both World Wars, post offices became even more important as providers
of wider government services, displaying general notices and instructions
and issuing forms, coupons and wartime allowances. Throughout
this period, the head of the service remained the Postmaster General.
After 1934, the Postmaster General acted as Chairman of a newly
created Post Office Board.
8. After the Second World War, there was a steady
growth in the role of post offices as agents for the provision
of government services and as providers of financial services
on their own account.
To some extent, this was driven by a fear that new technology
(such as the telex) and the growth of existing technology (particularly
the increasing number of domestic telephones) would reduce postal
traffic and thus mail transactions in post offices - a fear which
proved not so much misplaced as premature.
9. In 1969, there was a major change in the status
of the Post Office: from government department to nationalised
industry. However, the Post Office Savings Bank remained (for
a while) a government department, so from then on post offices
handled National Savings transactions as agents rather than on
their own account.
10. By the 1970s, the argument was commonplace that
post offices were an effective and efficient means of delivering
government services. In its 1976 report on sub-post offices, the
Post Office Users National Council (POUNC) wrote: "From the
point of view of Government, the long established system of agency
services using the widely spread network of post offices is more
convenient and probably cheaper than providing alternative facilities."
In the same report, POUNC provided a breakdown of post office
transactions for 1974-75. In summary, they consisted of the following:
|Other pensions and allowances||14
|National insurance stamps||6
|National Savings business||11
|Other agency business||2
|Total agency work||53
|Post office work||
|Other (Giro, postal orders etc)||21
|Total post office work||47
11. So in 1974/75, work as an agent on behalf of
Government - mainly, at that time, the Department of Health and
Social Security - was responsible for more than half of all transactions
in post offices. The Post Office's own financial products and
services, while lower in volume, were highly important to the
sustainability of the post office network - and the Post Office
Girobank was central to this.
12. From the start, the Girobank was seen as offering
a complementary service to that of the clearing banks. It would
be a simple and cheap basic banking service mainly for people
without a bank account, which in the mid-1960s amounted to 75%
of the adult population.
But it would also have advantages not available through clearing
banks, given that the post office network was far more extensive
(23,000 branches in 1968) and widespread than clearing banks,
and offered longer opening hours, including Saturdays.
13. The Girobank opened for business in October 1968.
Analysts argue that there were two main reasons for its failure
to thrive. First, it entered an increasingly crowded market for
financial products; notably, clearing banks improved their service,
and credit cards began to be issued at around this time. Second,
a large proportion of the target market stuck to cash transactions.
Within two years, Girobank's cumulative losses were nearly £20m.
Its future looked uncertain, but the Government concluded that
with a re-launch it could be viable. It did continue, with increased
charges and some diminution of service.
14. By the late 1980s, National Girobank had managed
to become Britain's sixth largest bank. It became independent
in 1988, as the Post Office Savings Bank had done twenty years
before. Unlike the Savings Bank, it became a public limited company,
and was bought by the Alliance and Leicester Building Society
15. Meanwhile, post offices developed for the first
time as a separate entity, in management terms, from the rest
of what is now Royal Mail. A 'Counter Services' department was
established in 1981; in 1986, post office counters became a separate
business, alongside the letters and parcels businesses; and in
1987, Post Office Counters became a limited company with separate
audited accounts. Its successor, Post Office Ltd, was established
in 2001, under powers granted to what is now Royal Mail in the
Postal Services Act 2000.
16. It was also at this period the late 1990s
and early 2000s that the largest ever collaborative project
was planned between Post Office Counters Ltd (as it then was)
and central government, in this case the Benefits Agency. This
was the Horizon IT project, to design and install computers throughout
the post office network. A core purpose of the project was to
automate the payment of benefits at post offices, both to increase
efficiency and to reduce fraud. It would be a serious understatement
to say that the project suffered teething troubles. The delays,
lack of clear focus and divided leadership of the project were
severely criticised by the National Audit Office in 2000.
17. By this point, the Government had already decided
that the benefit payment card element of the project would not
go ahead as planned. Instead, benefits would where possible be
paid direct into bank accounts, which would lead to a substantial
loss of business to post offices. Up to 2004-05, the provision
of government services had been responsible for more than 40%
of post office revenue; within three years, by 2007-08, this had
slipped to a little over 26%. Post Office Ltd had to adjust to
this loss of government business. To an extent it focused on its
traditional core business. Over the same three year period:
- revenue from mail, retail and
National Lottery transactions (the vast majority coming from the
contract between Post Office Ltd and the rest of the Royal Mail
Group) rose from around 27% to 35% of the total;
- revenue from telephony services rose from around
1% to 9%; and
- revenue from financial services was fairly constant
at around 29%.
18. One point worth noting about these figures is
that not all of this income was due to transactions actually taking
place in post offices: an increasing proportion of transactions
took place by telephone or online. The starker change over the
past few years has been in the sustainability and size of the
229 Edward Bennett, The Post Office and its Story
(London Seeley, 1912) Back
Postal Heritage Trust; Howard Robinson, Britain's Post Office
(Oxford University Press, 1953) and Edward Bennett, The Post
Office and its Story (London Seeley, 1912) Back
Including one in Slough operated by the Committee Chairman's great-great
grandmother, Maria Luff, who succeeded to the position at the
town's coaching inn, the White Hart, in May 1841 where her husband,
Charles, and his father, Francis, had both been the town's post
master. Maria Luff moved to dedicated post office premises in
December 1841. Back
M J Daunton, The Post Office since 1840 (Athlone Press,
1985), p280 Back
James Wilson Hyde, The Royal Mail (Harper & brothers,
1885), p 386 Back
Edward Bennett, The Post Office and its Story (London Seeley,
Source: Annual reports of the Postmaster General Back
Post Office Users National Council Report 14 Back
As set out in the 1965 White Paper 'A Post Office Giro'; British
Postal Archive Back
Alliance and Leicester plc archives and British Postal Archive Back
NAO, The Cancellation of the Benefit Payment Card Project,
HC: 857 1999-2000, 18 August 2000 Back
Postcomm, Eighth Annual Report on the Network of Post Offices
2007/08 , 2008 Back